Question

Q 5.24: crump company purchased $1,850 worth of inventory on account from payne industries on may 8th. the terms were 3/15, n/eom. crump also paid freight charges of $95 on may 9th. payne granted crump a $150 purchase allowance for slightly damaged goods. prepare the journal entry on may 17th when crump pays the invoice in full.

Answer 1

Given:
MAY 8 - Crump company purchased $1,850 worth of inventory on account from Payne industries ; the terms were 3/15, n/eom.
MAY 9 - Crump also paid freight charges of $95
Payne granted crump a $150 purchase allowance
MAY 17  - Payment in full

                                     Debit               Credit
May 8.
Purchases                      1,850
             Accounts Payable                   1,850


May 9
Freight-In                             95
            Cash                                             95

Accounts Payable              150
            Purchase returns and allowance   150

May 17 - Payment goes beyond the discounting period. No discount is given.

Accounts Payable            1,700
            Cash                                             1,700
(1,850 - 150 = 1,700)

"3/15, n/eom" This means that Crump can avail 3% discount when it pays on the 15th of the month and n discount when it pays at the end of the month.