Emerald Co. uses a perpetual inventory system and records purchases of merchandise at net cost. The company recently purchased 400 compact discs at an invoice price of $5,800 and terms of 3/10, n/30. Half of these discs had been mislabeled and were returned immediately to the supplier. The journal entry to record payment of this invoice after the discount period has expired will include a:
Journal entry to record payment of this invoice after the discount period has expired will include a
Date | Account title | Debit | credit |
Accounts payable | 2813 | ||
Merchandise inventory | 87 | ||
Cash | 2900 |
#The purchase was initially recorded at net of discount amount .3/10 ,n/30 means 3% of discount is taken if payment is made within 10 days maximum of 30 days.
Purchase amount recorded at net amount [5800[1-.03] | 5626 |
less:return (5626*1/2) | (2813) |
Net amount due for payment within a discount period | 2813 |
Since payment is made after discount period ,no discount is available |
2813/(1-.03) 2813/.97 2900 |
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