Answer:
Purchases = Number of units × Price per unit
= 1,100 × $50
= $55,000
= $1,650
The journal entries are as follows:
(1) On July 15,
Purchases A/c ($55,000 - $1,650) Dr. $53,350
To Accounts payable $53,350
(To record purchase of inventory on account)
On July 23,
Accounts payable A/c Dr. $53,350
To cash $53,350
(To record the payment of cash against accounts receivable)
(2) On August 15, 2018
Accounts payable A/c Dr. $53,350
Interest expenses A/c Dr. $1,650
To cash $55,000
(To record the payment on accounts payable)
(3) Perpetual inventory system:
(i) On July 15,
Merchandise Inventory A/c Dr. $53,350
To Accounts payable $53,350
(To record purchase of inventory on account)
(ii) On July 23,
Accounts payable A/c Dr. $53,350
To cash $53,350
(To record the payment of cash against accounts receivable)
(iii) On August 15, 2018
Accounts payable A/c Dr. $53,350
Interest expenses A/c Dr. $1,650
To cash $55,000
(To record the payment of cash against accounts payable and to recognize interest expense due lost discount)
