Question

Mathis Company and Reece Company use the perpetual inventory system. The following transactions occurred during the month of April:
a. On April 1, Mathis purchased merchandise on account from Reece with credit terms of 2/10, n/30. The selling price of the merchandise was $3,100, and the cost of the merchandise sold was $2,225.
b. On April 1, Mathis paid freight charges of $250 cash to have the goods delivered to its warehouse.
c. On April 8, Mathis returned $800 of the merchandise which had originally cost Reece $500.
d. On April 10, Mathis paid Reece the balance due.

Required:
Prepare the journal entry to record the April 10 payment to Mathis Company.

Answer 1

Answer:

Mathis Company

Journal Entry:

April 10:

Debit Accounts payable (Reece Company) $2,300

Credit Cash $2,254  

Credit Cash Discounts $46

To record the payment on account.

Explanation:

1) Data and Transaction Analysis:

Mathis Company

a. April 1: Inventory $3,100 Accounts payable (Reece Company) $3,100

with credit terms of 2/10, n/30.

b. April 1: Freight-in $250 Cash $250

c. April 8: Accounts payable (Reece Company) $800 Inventory $800

d. April 10: Accounts payable (Reece Company) $2,300 Cash $2,254  Cash Discounts $46

2) The payment on April 10 is for $2,300 ($3,100 - $800).  The 2% cash discount is applied on the $2,300 to arrive at a Cash payment of $2,254 ($2,300 - $46).