Merchandise Transactions under Perpetual Inventory System

Recording Merchandise Transactions

Jul 1: Business purchased $5,100 inventory from MCS Inc. on credit (Term 2/10, n/30 FOB)

Entry: Inventory (asset) $5,100, Accounts Payable $5,100

Jul 2:

Entry: Business purchased $2,200 inventory from DCP Inc. and paid in cash.

Entry: Inventory (asset) $2,200, Cash $2,200

Jul 3:

Entry: Business paid $235 shipping charges for the inventory purchased on Jul 1.

Entry: Shipping Expense (expense) $235, Cash $235

Jul 8:

Entry: Business purchased $6,300 inventory from Time's Inc. on credit (Term 2/10, n/30 FOB)

Entry: Inventory (asset) $6,300, Accounts Payable $6,300

Jul 12:

Entry: Business found $125 defective units from the Jul 8 purchase and returned them to Time's Inc.

Entry: Accounts Payable $125, Inventory (asset) $125

Jun 15:

Entry: Business paid MCS Inc in full.

Entry: Accounts Payable $5,100, Cash $5,100

Jul 30:

Entry: Business paid Time's Inc in full.

Entry: Accounts Payable $6,300, Cash $6,300

Instead of paying Time's Inc on Jul 30:

Entry: If the business was paying Time's Inc on Jul 18.

Entry: Accounts Payable $6,300, Cash $6,300

The entries record the merchandise transactions and payments related to inventory purchases and returns. The terms (2/10, n/30) indicate a discount of 2% if paid within 10 days and a net payment period of 30 days.