Question

On July 15, 2021, the Nixon Car Company purchased 1,100 tires from the Harwell Company for $50 each. The terms of the sale were 3/10, n/30. Nixon uses a perpetual 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, 2021.
2. Prepare the journal entry for the payment, assuming instead that it was made on August 15, 2021.

Prepare the journal entries to record the purchase on July 15 and payment on July 23, 2021.

Prepare the journal entry for the payment, assuming instead that it was made on August 15, 2021.

Answer 1

1)	Journal Entries
	Date	Particulars			Debit	Credit
	15-Jul	Merchandise Inventory			$ 53,350.00
		To Accounts Payable				$ 53,350.00
		(1100 x $ 50 x 97%)
	23-Jul	Accounts Payable			$ 53,350.00
		To Cash				$ 53,350.00
2)	Journal Entries
	Date	Particulars			Debit	Credit
	15-Aug	Accounts Payable			$ 53,350.00
		Merchandise Inventory			$   1,650.00
		To Cash				$ 55,000.00