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 $20,100. The merchandise had cost Mesa $13,708. 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 seller records for the (a) sale, (b) cash collection within the discount period, and (c) cash collection after the discount period 

Answer 1

1
a	Merchandise inventory	20100
	Accounts payable		20100
b	Accounts payable	20100
	Merchandise inventory		402	=20100*2%
	Cash		19698
c	Accounts payable	20100
	Cash		20100
2
a-1	Accounts receivable	20100
	Sales		20100
a-2	Cost of goods sold	13708
	Merchandise inventory		13708
b	Cash	19698
	Sales discounts	402		=20100*2%
	Accounts receivable		20100
c	Cash	20100
	Accounts receivable		20100