Consider the following transactions for Toys and MoreToys and More​: May 8
Toys and More purchased $113,300 worth of MegoBlock toys on account with credit terms of 2/10, n/60.
May 12
Toys and More returned $11,250 of the merchandise to MegoBlock due to damage during shipment.
May 15
Toys and More paid the amount due, less the return and discount. Requirements
1.
Journalize the purchase transactions. Explanations are not required.
2.
In the final​ analysis, how much did the inventory cost Toys and MoreToys and More​?
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Part 1
Requirement 1. Journalize the purchase transactions. Explanations are not required. ​(Assume the company uses a perpetual inventory system. Record debits​ first, then credits. Exclude explanations from journal​ entries.)
MayMay 88​: Toys and MoreToys and More purchased $ 113 comma 300$113,300 worth of MegoBlockMegoBlock toys on account with credit terms of 2 divided by 10 comma n divided by 60.2/10, n/60.
Date
Accounts
Debit
Credit
May 8
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

### Requirement 1: Journalize the Purchase Transactions

Let's go through each transaction step-by-step:

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#### **Transaction on May 8**
- **Description:** Toys and More purchased $113,300 worth of merchandise on account.
- **Credit Terms:** 2/10, n/60, meaning a 2% discount is available if paid within 10 days; otherwise, the net amount is due within 60 days.

**Journal Entry:**
- **Date:** May 8
  - **Debit:** Inventory $ \$113,300 $
  - **Credit:** Accounts Payable $ \$113,300 $

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#### **Transaction on May 12**
- **Description:** Toys and More returned $11,250 worth of damaged merchandise to MegoBlock.

**Journal Entry:**
- **Date:** May 12
  - **Debit:** Accounts Payable $ \$11,250 $
  - **Credit:** Inventory $ \$11,250 $

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#### **Transaction on May 15**
- **Description:** Toys and More paid the remaining balance, less the discount.

1. **Calculate the Net Amount after the Return:**  
   \[ \$113,300 - \$11,250 = \$102,050 \]

2. **Calculate the Discount (2%):**  
   \[ \$102,050 \times 0.02 = \$2,041 \]

3. **Calculate the Final Payment:**  
   \[ \$102,050 - \$2,041 = \$100,009 \]

**Journal Entry:**
- **Date:** May 15
  - **Debit:** Accounts Payable $ \$102,050 $
  - **Credit:** Cash $ \$100,009 $
  - **Credit:** Inventory $ \$2,041 $

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### Requirement 2: Final Inventory Cost

To determine the inventory cost to Toys and More, we need to account for the purchase, the return, and the discount:

1. **Initial Purchase Amount:**  
   \[ \$113,300 \]

2. **Subtract the Returned Merchandise:**  
   \[ \$113,300 - \$11,250 = \$102,050 \]

3. **Subtract the Discount on the Net Amount:**  
   \[ \$102,050 - \$2,041 = \$100,009 \]

So, the **final inventory cost** to Toys and More is **$100,009**.

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Would you like more details on any of the steps above?

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### Related Questions for Further Study:
1. What is the purpose of a purchase discount, and how does it benefit both the buyer and the seller?
2. How would the journal entries change if Toys and More used a periodic inventory system instead of a perpetual inventory system?
3. Why is it important to record returns and discounts in inventory accounts?
4. What other terms, like 2/10, n/60, are commonly used in credit transactions?
5. How would a damaged goods return affect the financial statements?

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#### Tip: 
To better understand credit terms like "2/10, n/60," remember that the first number is the discount percentage (2%), the second is the discount period (10 days), and the final part is the net credit period (60 days).

Consider the following transactions for Toys and More: May 8 - Toys and More purchased $113,300 worth of MegoBlock toys on account with credit terms of 2/10, n/60. May 12 - Toys and More returned $11,250 of the merchandise to MegoBlock due to damage during shipment. May 15 - Toys and More paid the amount due, less the return and discount. Requirements: 1. Journalize the purchase transactions. Explanations are not required. 2. In the final analysis, how much did the inventory cost Toys and More?

Learn how to account for purchases, returns, and discounts in an inventory system with a practical example from Toys and More. This problem involves calculating the final inventory cost and journalizing transactions with credit terms. Suitable for accounting students.

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