Question

Juniper Company uses a perpetual inventory system and the gross method of accounting for purchases. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise. On August 26, it paid the full amount due. The amount of the cash paid on August 26 equals:

Answer 1

The journal entries to record the purchase and payment of the merchandise should be:

August 7, merchandise purchased, terms 1/10, n/30

Dr Merchandise inventory 9,750

Cr Accounts payable 9,750

August 11, $1,500 worth of merchandise is returned

Dr Accounts payable 1,500

Cr Merchandise inventory 1,500

August 26, invoice is paid at full amount since discount period expired

Dr Accounts payable 8,250

Cr Cash 8,250