Problem 5-12A (Part Level Submission) Presented here are selected transactions f
ID: 2540220 • Letter: P
Question
Problem 5-12A (Part Level Submission) Presented here are selected transactions for Toth Company during September of the current year. Toth Company uses a periodic inventory system. Sept. 2 3 Purchased equipment on account for $61,900, terms n/30, FOB destination. Freight charges of $970 were paid by the appropriate party on the September 2 purchase of equipment. 4 Purchased supplies for $3,800 cash 6 Purchased inventory on account from Southlake Corp. at a cost of $63,800, terms 1/15, n/30, FOB shipping point. 7 Freight charges of $1,800 were paid by the appropriate party on the September 6 inventory purchase Returned damaged goods costing $5,200 that were originally purchased from Southlake Corp. on September 6. Received a credit on account Sold goods costing $15,400 to Fischer Limited for $20,000 on account, terms 2/10, n/30, FOB destination. 8 9 Freight charges of $410 were paid by the appropriate party on the September 9 sale of inventory. Received the balance due from Fischer Paid Southlake Corp. the balance due. Purchased inventory for $6,400 cash. Sold inventory costing $18,900 to Kun-Tai Inc. for $27,900 on account, terms 10 17 20 21 22 n/30, FOB shipping point Freight charges of $400 were paid by the appropriate party on the September 22 sale of inventory Kun-Tai returned goods sold for $9,500 that cost $7,000. The merchandise was restored to inventory. 23 28Explanation / Answer
As the company is using the a periodic inventory system, we need to use freight-in accounts for the frieght paid on purchases.
There is need to account for purchase returns as though no purchase had occurred in the first place.
Hence a separate account for purchase return is to be used for accounting the returns.