Question

On March 12, Medical Waste Services provides services on account to Grace Hospital for $9,100, terms 2/10, n/30. Grace does not pay for services until March 31, missing the 2% sales discount. Required: For Grace Hospital, record the purchase of services on account on March 12 and the payment of cash on March 31.

Answer 1

Answer:

March 12    Medical waste expense                  9100 Dr

                            Accounts Payable                         9100 Cr

March 31    Accounts Payable                            9100 Dr

                            Cash                                                9100 Cr

Explanation:

To record the services we received and have not paid for, we simply charge the service received as an expense and debit it and credit the Accounts Payable against it.

We use the relevant name for the service that we have created in our books. In this case, I have used the name Medical waste Expense.

The terms 2/10 n/30 means a 2% discount can be enjoyed by Grace Hospital if it pays the creditor within 10 days of receiving the service while n/30 means that the payment is to be made within the next 30 days from the day when service is received.

Grace doesn't pay for the  services in the first 10 days there by missing on the discount and the whole amount is paid on 31 march. We debit the Accounts Payable as the liability has been settled and credit the cash through which payment is made.