he journal entry to record the purchase on account of $950 of merchandise with freight of $45 prepaid by their supplier and added to the invoice is:
Question
he journal entry to record the purchase on account of 45 prepaid by their supplier and added to the invoice is:
Solution
The journal entry for this transaction would be as follows:
Step 1: Debit the Inventory account for the total amount of the purchase, including the freight. This is because the freight was prepaid by the supplier and added to the invoice, making it part of the cost of the merchandise.
So, you would debit Inventory for 950 for the merchandise + $45 for the freight).
Step 2: Credit the Accounts Payable account for the same amount. This is because the purchase was made on account, meaning the company will pay the supplier at a later date.
So, you would credit Accounts Payable for $995.
The journal entry would look like this:
| Date | Account Title | Debit | Credit |
|---|---|---|---|
| Inventory | 995 | ||
| Accounts Payable | 995 |
This entry reflects the increase in inventory and the corresponding increase in liabilities (Accounts Payable).
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