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On June 10, Cullumber Company purchased $8,400 of merchandise from Oriole Company, terms 3/10, n/30. Cullumber Company pays the freight costs of $380 on June 11. Goods totaling $500 are returned to Oriole Company for credit on June 12. On June 19, Cullumber Company pays Oriole Company in full, less the purchase discount. Both companies use a perpetual inventory system.

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Explanation:

June 10: DR inventory.  Debit: $8,400.  The inventory asset account will increase with the purchase.

CR Account payable.  Credit: $8400.-  Te AP liability will also increase

To record the purchase of inventory on account from Oriole Company

June 11:  DR inventory.  Debit: $380.   Inventory will also increase with the cost of the freight in

CR Cash.   Credit: $380.-  The cash asset decreases wit te payment amount.

To record the payment to freight.

June 12: DR Accounts payable.  Debit: $500.  Teh liability decreases with the cost of the goods returned.

CR inventory: $500.- The inventory asset also decreases.

To recor inventory returned to oriole

June 19   DR Account PAyable.  Debit: $1,900   The AP liability decrease with the gross payment amount ($8,400 - $500)

CR Inventory:  $237.- The inventory asset decreases with the discount taken ($7,900 X 0.03)

CR Cash  Credit:  $7663   The cash asset decreases with the net payment amount

To record the payment to oriole company and the discount taken.

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