Question

Recording Purchases Dawson Enterprises uses the perpetual system to record inventory transactions. Dawson had the following transactions in April: a. On April 1, Dawson purchased merchandise on credit for $25,150 with terms 2/10,n/30. b. On April 2, Dawson purchased merchandise on credit for $28,200 with terms 3/15,n/25. c. On April 9, Dawson paid for the purchase made on April 1. d. On April 25, Dawson paid for the merchandise purchased on April 2.

Answer 1

Dawson Enterprises used a perpetual inventory system and recorded discounted payments and full payments for merchandise purchased on credit in April. They took a 2% early payment discount for the first purchase and paid the full amount for the second purchase past the discount period.

Step-by-step explanation:

The student's question relates to the recording of inventory purchases under a perpetual inventory system in a business context. When Dawson Enterprises purchased merchandise on credit, terms like 2/10, n/30 and 3/15, n/25 offer discounts for early payment. These terms signify that the company can take a 2% discount if the invoice is paid within 10 days, or otherwise, the net amount is due within 30 days for the first purchase; and a 3% discount if the invoice is paid within 15 days, or otherwise, the net amount is due within 25 days for the second purchase.

As for the transactions:

1. On April 9, Dawson paid for the purchase made on April 1, utilizing the 2% discount. Therefore, instead of paying $25,150, the amount paid would be $25,150 * (1 - 0.02) = $24,647.
2. On April 25, Dawson paid for the merchandise purchased on April 2, without taking any discount, resulting in a payment of $28,200 as the payment did not occur within the discount period.

Dawson Enterprises must record these transactions accordingly in their accounting records, adjusting inventory and accounts payable based on the payment terms and actual payments made.