Question

On July 15, 2018, the Nixon Car Company purchased 2,000 tires from the Harwell Company for $41 each. The terms of the sale were 2/10, n/30. Nixon uses a periodic inventory system and the net method of accounting for purchase discounts.

Required:
1. Prepare the journal entries to record the purchase on July 15 and payment on July 23, 2018.
2. Prepare the journal entry to record the payment on August 15, 2018.
3. If Nixon instead uses a perpetual inventory system, explain any changes to the journal entries created in requirements 1 and 2.

Answer 1

Journal entries :

Date	account and explanation	debit	credit
July 15	Purchase (2000*41)*98%	80360
	Account payable		80360
	(To record purchase)
July 23	Account payable	80360
	cash		80360
	(To record paid)

Journal entry

Date	account and explanation	debit	credit
Aug 15	Account payable	80360
	Purchase discount lost	1640
	cash		82000
	(To record amount paid)

Journal entries :

Date	account and explanation	debit	credit
July 15	Merchandise inventory (2000*41)*98%	80360
	Account payable		80360
	(To record purchase)
July 23	Account payable	80360
	cash		80360
	(To record paid)

Journal entry

Date	account and explanation	debit	credit
Aug 15	Account payable	80360
	Merchandise inventory	1640
	cash		82000
	(To record amount paid)