Here are the journal entries for Mathis Company based on the perpetual inventory system transactions:

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1. April 1: Purchase of merchandise on account
Mathis Company purchased merchandise from Reece Company with a selling price of $4,100. The journal entry to record the purchase (excluding freight charges) is as follows:

April 1:

Inventory                4,100  
   Accounts Payable                  4,100  
(Purchased inventory on account)

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2. April 1: Payment of freight charges
Mathis Company paid $100 cash to cover the freight charges, which is added to the inventory cost as per the historical cost principle.

April 1:

Inventory                100  
   Cash                                  100  
(Recorded the payment of freight charges)

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3. April 8: Return of merchandise
Mathis returned $1,000 of merchandise (original cost to Reece was $700). Since Mathis is the buyer, they need to reduce their payable and inventory.

April 8:

Accounts Payable        1,000  
   Inventory                          1,000  
(Returned merchandise)

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4. April 10: Payment of the balance due
Mathis paid the remaining amount to Reece within the discount period. The terms are 2/10, n/30, meaning Mathis gets a 2% discount for paying within 10 days. After the return, the remaining balance was $3,100 ($4,100 - $1,000). The 2% discount on $3,100 is $62. So Mathis will pay $3,100 - $62 = $3,038.

April 10:

Accounts Payable        3,100  
   Cash                                 3,038  
   Inventory                            62  
(Paid accounts payable within discount period, applying discount)

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Recap of entries:

1. Purchased inventory on account:
   • Debit: Inventory $4,100, Credit: Accounts Payable $4,100
2. Freight charges:
   • Debit: Inventory $100, Credit: Cash $100
3. Return of merchandise:
   • Debit: Accounts Payable $1,000, Credit: Inventory $1,000
4. Payment to Reece:
   • Debit: Accounts Payable $3,100, Credit: Cash $3,038, Credit: Inventory $62 (discount)

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Do you want to go over any details or have any questions?

Here are 5 relative questions:

1. What is the purpose of the 2/10, n/30 payment term?
2. How would Mathis record the transactions under a periodic inventory system?
3. What if Mathis had paid after the discount period—how would the journal entry change?
4. Why is freight-in added to inventory under the perpetual system?
5. How is the return of inventory recorded differently in the seller's books?

Tip: Always watch for terms like 2/10, n/30 to take advantage of discounts and improve cash flow!