Question

Pronghorn Corp. uses a perpetual inventory system. The company had the following inventory transactions in April:

April	3		Purchased merchandise from DeVito Ltd. for $25,700, terms 1/10, n/30, FOB shipping point.
	6		The appropriate company paid freight costs of $700 on the merchandise purchased on April 3.
	7		Purchased supplies on account for $5,450.
	8		Returned damaged merchandise to DeVito and was given a purchase allowance of $3,400. The merchandise was repaired by DeVito and returned to inventory for future resale.
	30		Paid the amount due to DeVito in full.

Assume that Pronghorn paid the balance due to DeVito on April 12 instead of April 30. Prepare the journal entry to record this payment on Pronghorn ’s books. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to the nearest whole dollar, e.g. 5,725.)

Date	Account Titles and Explanation	Debit	Credit
Apr. 12

Answer 1

Journal

Date	Account Title and Explanation	Debit	Credit
April 12	Accounts payable - DeVito Ltd.	22,300
	Cash		22,300
	(To record cash payment to settle accounts payable of DeVito Ltd. )

Purchase terms are 1/10, n/30, which means 1% discount will be allowed if payment is made with in 10 days.

Inventory was purchased on April 3 but payment was made on April 12 i.e. after the discount period. Hence, no discount will be allowed.

Cash to be paid = Purchase - purchase allowance

= 25,700 - 3,400

= $22,300