On July 15, 2021, the Nixon Car Company purchased 2,200 tires from the Harwell Company for $45 each. The terms of the sale were 2/10, n/30. Nixon uses a perpetual inventory system and the gross method of accounting for purchase discounts.

The journal entries are shown below:

On July 15:

Purchase A/c Dr $97,020

To Accounts payable $97,020

(By buying goods on credit with discount), the following are shown in the estimates of tire sales following application of the discount:

= Number of tires * price per tire - discount rate

= 2,200 tires * $45 - 2%

= $99,000 - $1,980

= $97,020

On July 23:

Account payable A/c Dr $97,020

To Cash A/c $97,020

(Being payment is made)

On August 15:

Account payable A/c Dr $97,020

Interest expense A/c Dr $1,980

To Cash A/c $99,000

(Being payment is made on late interval)