Santa Fe Retailing purchased merchandise “as is” (with no
returns) from Mesa Wholesalers with credit terms of 3/10, n/60 and
an invoice price of $17,100. The merchandise had cost Mesa $11,662.
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.
1. In books of buyer.
sno | accounts | debit | credit |
a | Merchandise inventory | 17,100 | |
..........To accounts payable | 17,100 | ||
b | Accounts payable | 17,100 | |
............To cash a/c | 16,587 | ||
.............To merchandise inventory (17,100-16,587) | 513 | ||
(amount = invoice price *(1- discount rate) =>17,100*(1-0.03))=>16,587). | |||
c | Accounts payable | 17,100 | |
...........To cash a/c | 17,100 |
2.in the books of seller.
sno | accounts | debit | credit |
1 | Accounts receivable a/c | 17,100 | |
..........To sales revenue a/c | 17,100 | ||
(to record sales) | |||
cost of goods sold a/c | 11,662 | ||
..........To merchandise inventory | 11,662 | ||
(to record cost of goods sold) | |||
2 | Cash a/c (17,100-513) | 16,587 | |
sales discounts a/c | 513 | ||
........To Accounts receivable a/c | 17,100 | ||
(discount = 17,100*3%=>$513) | |||
3 | cash a/c | 17,100 | |
...........To Accounts receivable a/c | 17,100 |
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