Question

Santa Fe Company purchased merchandise for resale from Mesa Company with an invoice price of $24,000 and credit terms of 3/10, 1/60. The merchandise had cost Mesa $16,000 Santa Fe paid within the discount period.

 Prepare journal entries to record each of the merchandising transactions assuming that the periodic inventory system is used by both the buyer and the seller.

 BUYER - Santa Fe Company

Answer 1

	Buyer-Santa Fe Company
	Date		Account titles and explanation						Debit	Credit
	On the day of purchase		Inventory						24000
			Accounts payable							24000
			(Inventory purchased on account)
	On the day of payment		Cash			(24000-720)			23280
			Inventory			(24000*3%)			720
			Accounts payable							24000
			(Paid to supplier-Within 10 days and eligible for 3% discount)
	Seller-Mesa company
	Date		Account titles and explanation						Debit	Credit
	On the day of sale		Accounts receivable						24000
			Sales revenue							24000
			(Sales on account)
			Cost of goods sold						16000
			Inventory							16000
			(Cost of goods sold recorded)
	On the day of payment		Cash			(24000-720)			23280
			Sales discount			(24000*3%)			720
			Accounts receivable							24000
			(Payment received from customer)