Question

Marshall purchases inventory for sale from Tidy Wholesalers for $8,500 with terms 1/10, n/30. 5 Marshall pays Express Transfer $45 for freight on the July 4 order. 7 Marshall buys an additional $11,985 in inventory from Tidy Wholesalers with terms 1/10, n/30. 13 Marshall pays Tidy Wholesalers the balance due on both invoices.Required: Journalize the above transactions.

Answer 1

July 4.

Dr. Purchases $8,500

Cr . Tidy $8,500

Dr. Freight Charges $45

Cr. Express Transfer $45

July 5.

Dr. Express Transfer $45

Cr. Cash $45

July 7.

Dr. Purchases $11,985

Cr . Tidy $11,985

July 13.

Dr. Tidy $20,485

Cr. Cash $20,280

Cr, Discount Income $205

Step-by-step explanation:

Credit terms of 1/10, 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.

As the both payments are made within the discount period. So discount of 1% is availed by the Marshall.

Discount amount = ( $8,500 + $11,985 ) x 1% = $20,485 x 1% = $205

Payment Made = $20,485 - $205 = $20,280