The following selected transactions were completed by Silvergate Co. during May of the current...
Question:
The following selected transactions were completed by Silvergate Co. during May of the current year:
| May 3. | Purchased merchandise for, $16,000, terms FOB destination, 2/10, n/30. |
| 6. | Issued debit memorandum for $4,000 of merchandise returned from a purchase on May 3. |
| 10. | Purchased merchandise, $25,000, terms FOB shipping point, n/eom. |
| 10. | Paid freight of $600 on May 10 purchase. |
| 13. | Paid for invoice of May 3, less debit memorandum of May 6, and discount. |
| 31. | Paid for invoice of May 10. |
Illustrate the effects of each of the preceding transactions on the accounts and financial statements of Silvergate Co. Identify each transaction by date.
The Effect of Inventory Purchases
When a retail company purchases inventory, the purchases are recorded when the inventory is received. Inventory returns are likewise recorded, when goods are returned to suppliers.
Answer and Explanation: 1
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We will assume the company uses the perpetual inventory system:
| Date | Transaction | Effect |
|---|---|---|
| May 3. | Purchased merchandise for, $16,000, terms FOB... |
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Recording Purchases Using the Perpetual System
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Chapter 6 / Lesson 6
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The perpetual system is used by updating the inventory account for every purchase and sale. Learn how to record a purchase using the system of double-entry accounting.
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