Question

On July 15, 2018, the Nixon Car Company purchased 3,000 tires from the Harwell Company for $30 each. The terms of the sale were 2/10, n/30. Nixon uses a periodic inventory system and the net method of accounting for purchase discounts.

Required:
1. Prepare the journal entries to record the purchase on July 15 and payment on July 23, 2018.
2. Prepare the journal entry to record the payment on August 15, 2018.
3. If Nixon instead uses a perpetual inventory system, explain any changes to the journal entries created in requirements 1 and 2.


Complete this question by entering your answers in the tabs below. Required 3 Required 1 Required 2 Prepare the journal entry to record the payment on August 15, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet > 1 Record payment of July 15 purchase Note: Enter debits before credits. Debit Date General Journal Credit August 15, 2018 Clear entry View general journal Record entry

Answer 1

SOLUTION

1 & 2.

S.No.	Date	Accounts titles and Explanation	Debit ($)	Credit ($)
1.	July 15	Purchases [(3,000*$30)*98%]	88,200
		Accounts payable		88,200
	July 23	Accounts payable	88,200
		Cash		88,200
2.	Aug. 15	Accounts payable	88,200
		Interest expense	1,800
		Cash (3,000*$30)		90,000

3.

S.No.	Date	Accounts titles and Explanation	Debit ($)	Credit ($)
1.	July 15	Merchandise inventory [(3,000*$30)*98%]	88,200
		Accounts payable		88,200
	July 23	Accounts payable	88,200
		Cash		88,200
2.	Aug. 15	Accounts payable	88,200
		Interest expense	1,800
		Cash (3,000*$30)		90,000

The July 15 entry would include a debit to the merchandise inventory account instead of to Purchases.