Karns Company Purchased Merchandise on Account from Bailey Office Suppliers

Essay

Karns Company purchased merchandise on account from Bailey Office Suppliers for $174000 with terms of 2/10 n/30. During the discount period Karns returned some merchandise and paid $156800 as payment in full. Karns uses a perpetual inventory system. Prepare the journal entries that Karns Company made to record:
(1) the purchase of merchandise.
(2) the return of merchandise.
(3) the payment on account.
(b) Hinds Company sold merchandise to Peter Company on account for $146000 with credit terms of ?/10 n/30. The cost of the merchandise sold was $86140. During the discount period Peter Company returned $6000 of merchandise and paid its account in full (minus the discount) by remitting $137200 in cash. Both companies use a perpetual inventory system. Prepare the journal entries that Hinds Company made to record:
(1) the sale of merchandise.
(2) the return of merchandise.
(3) the collection on account.