19E - Horngren'S Financial And Managerial Accounting

Question

Kingston Tires received the following invoice from a supplier (Fields Distribution, Inc.):

Requirements 

1. Journalize the transaction required by Kingston Tires on September 23, 2018. Do not round numbers to the nearest whole dollar. Assume tires are purchased on account. 

2. Journalize the return on Kingston’s books on September 28, 2018, of the D39–X4 Radials, which were ordered by mistake. Do not round numbers to the nearest whole dollar. 

3. Journalize the payment on October 1, 2018, to Fields Distribution, Inc. Do not round numbers to the nearest whole dollar.

Step-by-Step Solution

Answer

The total amount paid by Kingston Tires is $769.34.

Step 1: Meaning of Invoice

An invoice refers to a commercial document prepared by the seller of goods or services. It reminds the buyer to pay the outstanding amount against the purchases made. This document contains essential details associated with the payment term, price of goods, quantity, and many more.

Step 2: Journalizing the transaction required by Kingston Tires

Date	Accounts and Explanation	Debit ($)	Credit ($)
2018
Sept 23	Merchandise Inventory	929.60
	Accounts payable		929.60
	(To record the purchase of inventory)

Step 3:Journalizing the return on Kingston’s books

Date	Accounts and Explanation	Debit ($)	Credit ($)
2018
Sept 28	Accounts payable	152.48
	Merchandise inventory		152.48
	(To record the return of inventory)

Step 4: Journalizing the payment transaction

Date	Accounts and Explanation	Debit ($)	Credit ($)
2018
Oct 1	Accounts payable (929.60-152.48)	777.12
	Cash (777.12-1%*777.12)		769.34
	Merchandise inventory		7.77
	(To record the payment)