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Santa Fe Retailing purchased merchandise “as is” (with no returns) from Mesa Wholesalers with credit terms...

Santa Fe Retailing purchased merchandise “as is” (with no returns) from Mesa Wholesalers with credit terms of 2/10, n/60 and an invoice price of $19,900. The merchandise had cost Mesa $13,572. Assume that both buyer and seller use a periodic inventory system and the gross method.

1. Prepare entries that the buyer should record for (a) the purchase, (b) cash payment within the discount period, and (c) cash payment after the discount period.
2. Prepare entries that the seller should record for (a) the sale, (b) cash collection within the discount period, and (c) cash collection after the discount period.

Business   Accounting   
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Answer #1

Journal entry : Buyer

No General Journal Debit Credit
a Purchase 19900
Account payable 19900
b Account payable 19900
Cash (19900*98%) 19502
Purchase discount 398
c Account payable 19900
Cash 19900

Journal entry : Seller

No General Journal Debit Credit
a Account receivable 19900
Sales revenue 19900
b cash 19502
Sales discount 398
account receivable 19900
c Cash 19900
Account receivable 19900
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