Question

On July 22, a company that uses the perpetual inventory system purchased merchandise inventory at a cost of $5,650 with credit terms 2/10, net 30. If the company pays for the purchase on August 1, what would be the appropriate journal entry?

Answer 1

Dr Accounts payable 5,650

Cr Cash 5,537

Cr Purchase discount 113

Step-by-step explanation:

the journal entry to record the purchase:

July 22, purchase of merchandise on account, credit terms 2/10, net 30

Dr Merchandise inventory 5,650

Cr Accounts payable 5,650

Since the company paid the invoice within the discount term, the journal entry should be:

August 1, invoice paid within discount period

Dr Accounts payable 5,650

Cr Cash 5,537

Cr Purchase discount 113

The credit terms 2/10, net 30, means that if the invoice is paid within 10 days, the sales price will be lowered by 2%, and if the invoice is paid afterwards and before 30 days, the payment must cover the full invoice price.