Accounting Question?

Question

Hi,
I am working on some homework and I am having trouble figuring out how to log the journal entries for this problem. Please Help?

January 8th, Bob purchases $5,000,000 of specialty T-Shirts from The T-Shirt Company. The invoice terms are 5/30, n/60. Bob pays $100,000 cash for transportation cost of the inventory. Upon unpacking the inventory, On January 9th, Bob notices that some of the T-Shirts are defective. He returns $350,000 of the merchandise to the vendor and receives a full credit.

Thanks

Answer 1

First step - You need to know whether you are going to use the periodic or perpetual method to record the transactions. 

Answer 2

Date      Account                                                            Debit               Credit

 

Jan 8     T-Shirt Inventory                                              5,100,000

                        Cash                                                                                     100,000

                        T-Shirt Company Payable (5/30, n/60)                          5,000,000

(To record receipt of inventory and transportation costs)

 

Jan 9                 T-Shirt Inventory                                                               350,000

             T-Shirt Company Payable                                     350,000

(To record returned defective merchandise)