Question

Santa Fe Retailing purchased merchandise “as is” (with no returns) from Mesa Wholesalers with credit terms of 2/10, n/60 and an invoice price of $28,500. The merchandise had cost Mesa $19,437. Assume that both buyer and seller use a perpetual inventory system and the gross method.

1. Prepare entries that the buyer records for the (a) purchase, (b) cash payment within the discount period, and (c) cash payment after the discount period.
2. Prepare entries that the sellerrecords for the (a) sale, (b) cash collection within the discount period, and (c) cash collection after the discount period.

General journal

Answer 1

1
Transaction	General Journal	Debit	Credit
a	Merchandise Inventory	28500
	Accounts Payable		28500
b	Accounts Payable	28500
	Merchandise Inventory		570	=28500*2%
	Cash		27930
c	Accounts Payable	28500
	Cash		28500
2
Transaction	General Journal	Debit	Credit
a-1	Accounts Receivable	28500
	Sales		28500
a-2	Cost of goods sold	19437
	Merchandise Inventory		19437
b	Cash	27930
	Sales discount	570		=28500*2%
	Accounts Receivable		28500
c	Cash	28500
	Accounts Receivable		28500