Question

BE13-1 (L01) Roley Corporation uses a periodic inventory system and the gross method of accounting for purchase discounts. On July 1, Roley purchased \(60,000 of inventory, terms 2/10, n/30, FOB shipping point. Roley paid freight costs of \)1,200. On July 3, Roley returned damaged goods and received credit of $6,000. On July 10, Roley paid for the goods. Prepare all necessary journal entries for Roley.

Short answer

The amount of freight expense is $1,200.

Step-by-step solution

Meaning of Accounts Payable

The amount due for the purchaser to the supplier of goods or services is referred to as accounts payable. The purchaser needs to record it as a liability on the balance sheet.

Closing Entries

Date	Accounts and Explanation	Debit $	Credit $
July, 1	Purchase	$60,000
	Accounts Payable		$60,000
	(To record inventory purchased on credit)
July, 1	Freight Expenses	$1,200
	Cash		$1,200
	(To record freight paid)
July, 3	Accounts Payable	$6,000
	Purchase Return and Allowances		$6,000
	(To record purchase return)
July, 10	Accounts Payable ($60,000-$6,000)	$54,000
	Cash		$52,920
	Purchase Discount ($54,000 x 2%)		$1,080
	(To record accounts payable paid in cash)