Question

On March 5, 2020, Northwest Co. purchased $400,000 in merchandise on account with credit terms of 1/15, n/45. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $7,500. Merchandise with an invoice amount of $5,000 was returned for credit on March 12, 2020. Northwest paid the vendor for the amount owe on March 17, 2020. Assuming Northwest uses a perpetual inventory system and the gross method to record purchases, what journal entry would Northwest record for the payment made on March 17, 2020

Answer 1

Answer:

The journal entry would be as follows:

                                     Debit                Credit

Accounts payable        $395,000

                                      Cash                $391,050

                                       Inventory         $3,950

Explanation:

In order to prepare the journal entry would Northwest record for the payment made on March 17, 2020, we have to calculate according to the given data the following:

Northwest Co. purchased $400,000 in merchandise on account with credit terms of 1/15, n/45, and Merchandise with an invoice amount of $5,000 was returned for credit on March 12, 2020, hence, ross amount due = Amount of purchase - return = $400,000-$5,000 = $395,000 will be debited to Accounts payable .

Discount will be allowed as payment made within 15 dyas , hence Discount will be = 1% of $395,000 = $3,950 which will be credited to inventory .

Net amount paid will be credit to cash = $395,000-$3,950 = $391,050.

Therefore, the journal entry would be as follows:

                                     Debit                Credit

Accounts payable        $395,000

                                      Cash                $391,050

                                       Inventory         $3,950

Answer 2

Answer:

Net amount paid = 391050

Explanation:

Accounts payable =395,000

Cash =391,050

Inventory =3,950

Accounts payable =396,000

Cash =396,000

Accounts payable =395,000

Purchase discount  =3,950

Cash =398,950

Accounts payable =400,000

Cash =396,000

Purchase discount =4,000

Accounts payable  = 395,000

Cash  = 391,050

Inventory  = 3,950

 

Gross amount due = Amount of purchase - return = 400000-5000 = 395000 will be debited to Accounts payable

Discount will be allowed as payment made within 15 dyas

Disount will be = 1% of 395000 = 3950 which will be credited to inventory

Net amount paid will be credit to cash = 395000-3950 = 391050