Question

Goods costing $1,900 are purchased on account on July 15 with credit terms of 2/10, n/30. On July 18, the purchaser receives a $300 credit from the supplier for damaged goods. Give the journal entry on July 24 to record payment of the balance due within the discount period

Answer 1

Explanation:

The journal entry is shown below:

Accounts payable A/c Dr $1,600

     To Cash A/c   $1,568  

     To Merchandise Inventory A/c $32

(Being due amount is paid and the remaining balance is credited to the cash account)

The computation is shown below:

For account payable

= Purchase value of goods - credit from the supplier for damaged goods

= $1,900 - $300

= $1,600

For discount

= $1,600 × 2%

= $32

We assume the perpetual inventory method is followed