Question

Shankar Company uses a periodic system to record inventory transactions. The company purchases inventory on account on February 2 for $25,000, with terms 2/10, n/30. On February 10, the company pays on account for the inventory. Record the inventory purchase on February 2 and the payment on February 10. (If no entry is required for a particular transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Answer:

Explanation:

The journal entries are shown below:

On  February 2

Inventory A/c Dr  $25,000

      To Account payable A/c $25,000

(Being purchase of inventory is recorded)

On February 10

Account payable A/c $25,000

     To Cash A/c                              $24,500

     To Inventory A/c                        $500

(Being payment is made for cash and discount is recorded under inventory)

The discount is computed below:

= Inventory amount × discount percentage

= $25,000 × 2%

= $500

The remaining balance is credited to the cash account