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Difficulty: HardPurchases Journal and Purchases Returns Journal

Folake Traders completed the following transactions during June 2026:

• June 4: Purchased goods for resale on credit from Balogun Enterprise valued at ₦150,000\text{₦}150,000, subject to a 10%10\% trade discount.
• June 10: Purchased office furniture on credit from Kwara Furniture Mart for ₦80,000\text{₦}80,000.
• June 18: Bought inventory for resale on credit from Danjuma & Sons for ₦200,000\text{₦}200,000 less a 5%5\% trade discount.
• June 22: Acquired computer equipment on credit from Tech Hub for ₦120,000\text{₦}120,000.
• June 27: Bought goods for resale paying ₦50,000\text{₦}50,000 cash from Okafor Stores.

What is the total amount that should be entered into the Purchases Journal at the end of June 2026?

  1. ₦325,000Answer
  2. B
    ₦350,000
  3. C
    ₦375,000
  4. D
    ₦525,000

Answer

The total amount entered into the Purchases Journal is ₦325,000.
The Purchases Journal is used exclusively to record credit purchases of goods meant for resale. Trade discounts are subtracted before entering figures into the journal. Here, net credit purchases are ₦135,000\text{₦}135,000 (June 4) plus ₦190,000\text{₦}190,000 (June 18), giving ₦325,000\text{₦}325,000. Office furniture and computer equipment are capital items recorded in the General Journal, while cash purchases are entered in the Cash Book.

Step-by-Step Solution

1
Identify transactions eligible for the Purchases Journal
Only credit purchases of merchandise intended for resale (June 4 and June 18) are included.
The Purchases Journal strictly records credit purchases of goods for resale. Credit purchases of fixed assets (June 10 and June 22) go to the General Journal, and cash purchases (June 27) go to the Cash Book.
2
Calculate the net price for the June 4 transaction
₦150,000−(10%×₦150,000)=₦135,000\text{₦}150,000 - (10\% \times \text{₦}150,000) = \text{₦}135,000
Trade discounts are deducted immediately from the invoice price before recording in the day book.
3
Calculate the net price for the June 18 transaction
₦200,000−(5%×₦200,000)=₦190,000\text{₦}200,000 - (5\% \times \text{₦}200,000) = \text{₦}190,000
Trade discount must be subtracted to arrive at net credit purchases.
4
Sum the eligible net credit purchases
₦135,000+₦190,000=₦325,000\text{₦}135,000 + \text{₦}190,000 = \text{₦}325,000
The Purchases Journal total reflects net credit purchases of inventory for the month.

Key Concept

Scope and Rules of the Purchases Journal
Estimated Time:2m 0s
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Topics

Purchases Journal and Purchases Returns Journal

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