Question

On June​ 1, Neighbor Company purchased inventory on account with a cost of​ $3,000. The credit terms were​ 3/10, net 30. On June​ 2, Neighbor returned 50 percent of the inventory. Neighbor uses the perpetual inventory system. On June​ 8, Neighbor paid for the inventory. What journal entry did Neighbor Company prepare on June​ 8?

Answer 1

June 8 Accounts Payable $1500 Dr

Cash $1455 Cr

Discount Received $45 Cr

Step-by-step explanation:

The discount term is 3/10 which means that Neighnor company can avail a cash discount of 3% on the amount of purchases if the payment is made within 10 days of purchasing the inventory. Neighbor pays the supplier on 8 june which is in the discount period and avails the discount.

After the returns, the outstanding amount on accounts payable account was 1500 ( 3000 * 0.5 = 1500)

The discount received is 3% of 1500 = $45

The cash paid to settle the account is 1500 - 45 = 1455