Questions: Aug. 10. Purchased merchandise on account, 12,500, terms FOB shipping point, n/eom. Paid 300 cash to the freight company for delivery of the merchandise.

Solution Steps

1. Record the purchase of merchandise on account, which increases inventory and accounts payable.
2. Record the cash payment for freight, which decreases cash and increases inventory cost.

When merchandise is purchased on account, the inventory increases by the purchase amount, and accounts payable also increases by the same amount.

Given:

• Purchase amount = \$12,500

Mathematically: \[ \text{Inventory} = \text{Inventory} + \text{Purchase Amount} = 0 + 12500 = 12500 \] \[ \text{Accounts Payable} = \text{Accounts Payable} + \text{Purchase Amount} = 0 + 12500 = 12500 \]

The cash payment for freight decreases the cash balance and increases the inventory cost.

Given:

• Freight cost = \$300

Mathematically: \[ \text{Cash} = \text{Cash} - \text{Freight Cost} = 0 - 300 = -300 \] \[ \text{Inventory} = \text{Inventory} + \text{Freight Cost} = 12500 + 300 = 12800 \]

Final Answer