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15 February, 04:42

Travis Company purchased merchandise on account from a supplier for $7,500, terms 2/10, net 30 on December 26. Travis Company paid for the merchandise on December 31, within the discount period. Required: Under a perpetual inventory system, record the journal entries required for the above transactions. Refer to the Chart of Accounts for exact wording of account titles.

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  1. 15 February, 08:37
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    December 26

    Dr. Inventory $7,500

    Cr. Account Payable $7,500

    December 31

    Dr. Account Payable $7,500

    Dr. Discount Received $150

    Cr. Cash $7,350

    Explanation:

    Credit terms of 2/10, n/30 means there is a discount of 2% is available on payment of due amount within discount period of 10 days after sale with net credit period of 30 days.

    Purchase = $7,500

    As payment is made within discount period, so the discount will be availed.

    Discount = $7,500 x 2% = $150

    Payment = $7,500 - $150 = $7,350
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