Final answer:
A company's journal entries for a purchase within a sales discount period include the initial entry when the purchase is made and the entry for the payment including the discount. The initial purchase is debited to Inventory and credited to Accounts Payable, and the payment entry debits Accounts Payable and credits Cash and Inventory for the discount received.
Step-by-step explanation:
When a company makes a purchase within a sales discount period, it usually records two journal entries. The first entry is when the purchase is initially made on credit, and the second entry is when the payment is made within the discount period. Here's an example of these entries for an initial purchase of $1,000 with terms 2/10, n/30, meaning there is a 2% discount if paid within 10 days, otherwise the net amount is due within 30 days:
- Entry 1: Debit Inventory $1,000; Credit Accounts Payable $1,000
- Entry 2 (within the discount period): Debit Accounts Payable $1,000; Credit Cash $980; Credit Inventory (discount) $20
These entries reflect the initial recognition of the payable and the subsequent payment that benefits from the sales discount, reducing the cost of inventory and the cash paid.