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Purchase-Related Transactions Journalize entries for the following related transactions of Lilly Heating & Air Company: a. Purchased $25,000...

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Accounting

Purchase-Related Transactions

Journalize entries for the following related transactions ofLilly Heating & Air Company:

a. Purchased $25,000 of merchandise from Schell Co. on account,terms 2/10, n/30.

b. Paid the amount owed on the invoice within the discountperiod.

c. Discovered that $5,000 before purchases discount of themerchandise was defective and returned items, receiving credit.

d. Purchased $3,900 of merchandise from Schell Co. on account,terms n/30.

e. Received a check for the balance owed from the return in (c),after deducting for the purchase in (d).

Determining Gross Profit

During the current year, merchandise is sold for $609,000. Thecost of the goods sold is $347,130.

a. What is the amount of the grossprofit?
$

b. Compute the gross profit percentage (grossprofit divided by sales). Round to the nearest whole number.
%

c. When will the income statement report netincome?

Answer & Explanation Solved by verified expert
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Solution:

Journal Entries - Lilly Heating & Air Company
Event Particulars Debit Credit
a Merchandise inventory Dr $25,000.00
      To Accounts Payable - Schell Co $25,000.00
(To record purchase of merchandise on account)
b Accounts Payable - Schell Co Dr $25,000.00
      To Cash $24,500.00
      To Merchandise Inventory ($25,000*2%) $500.00
(To record payments to supplier within discount period)
c Accounts Payable - Schell Co Dr $4,900.00
      To Merchandise Inventory ($5,000*98%) $4,900.00
(To record merchandise returned)
d Merchandise inventory Dr $3,900.00
      To Accounts Payable - Schell Co $3,900.00
(To record purchase of merchandise on account)
e Cash Dr ($4,900 - $3,900) $1,000.00
      To Accounts Payable - Schell Co $1,000.00
(To record cash received from supplier)

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