Question

Santa Fe Retailing purchased merchandise “as is” (with no returns) from Mesa Wholesalers with credit terms of 3/10, n/60 and an invoice price of $24,400. The merchandise had cost Mesa $16,641. Assume that both buyer and seller use a perpetual inventory system and the gross method.

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

Answer 1

1
a	Merchandise inventory	24400
	Accounts payable		24400
b	Accounts payable	24400
	Merchandise inventory		732	=24400*3%
	Cash		23668
c	Accounts payable	24400
	Cash		24400
2
a	Accounts receivable	24400
	Sales		24400
	Cost of goods sold	16641
	Merchandise inventory		16641
b	Cash	23668
	Sales discounts	732
	Accounts receivable		24400
c	Cash	24400
	Accounts receivable		24400