Question

Emerald Co. uses a perpetual inventory system and records purchases of merchandise at net cost. The...

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:

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Answer #1

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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