Meteor Co. purchased merchandise on March 4, 2021, at a price of $31,000, subject to credit terms of 3/10, n/30. Meteor uses the net method for recording purchases and uses a periodic inventory system. Required: 1. Prepare the journal entry to record the purchase. 2. & 3. Prepare the journal entries to record the appropriate payment if the entire invoice is paid on March 11, 2021 and April 2, 2021.

1.

Dr Purchases 30,070

Cr Accounts payable 30,070

2.

Dr Accounts payable 30,070

Cr Cash 30,070

3.

Dr Accounts payable 30,070

Dr Interest expense 930

Cr Cash 30,000

Explanation:

Meteor Co. Journal entry

1.

Dr Purchases 30,070

($31,000 x. 97)

Cr Accounts payable 30,070

2.

Dr Accounts payable 30,070

Cr Cash 30,070

3.

Dr Accounts payable 30,070

Dr Interest expense 930

(31,000-30,070)

Cr Cash 30,000

Since the company purchased merchandise at a price of $31,000 in which it was been subject to credit terms of 3/10 that means 100%-3% credit term will give us 97% credit term * $31,000 which enabled us to arrived at 30,070.