Question

Cleveland Company purchased $2,700 of inventory on account from Pinto Industries on March 8th. The terms were 2/15, n/45. Cleveland also paid freight charges of $200 on March 9th and returned $450 of the inventory on March 13th. Journalize the entry to record the payment of the invoice on April 5th.

Answer 1

To record the payment of the invoice on April 5th, the journal entry includes debit to Accounts Payable and credits to Purchases Discounts, Freight Expense, and Cash.

Step-by-step explanation:

To journalize the payment of the invoice on April 5th, we need to record the transaction in the accounting books. First, we need to calculate the amount to be paid after taking into consideration the terms. Since the terms are 2/15, n/45, it means that if the payment is made within 15 days of the invoice date, a 2% discount can be taken. If not, the full amount is due within 45 days.

The amount of the inventory purchased was $2,700. The discount of 2% would be $2,700 * 2% = $54. So, the amount to be paid if the discount is taken is $2,700 - $54 = $2,646.

The journal entry to record the payment on April 5th would be:

1. Accounts Payable Dr. $2,646
2. Purchases Discounts Cr. $54
3. Freight Expense Cr. $200
4. Cash Cr. $2,000

Answer 2

Accounts Payable $2900

Cash $2691

Inventory $209

Cleveland didn't pay during the discount period,

So the amount due is $2,700 - 450 = $2,250

Cash was charged in freight charges prior to delivery of the invoice.