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.
1) Journal entry
| Date | account and explanation | Debit | Credit |
| July 15 | Purchase (3000*30*98%) | 88200 | |
| Account payable | 88200 | ||
| July 23 | Account payable | 88200 | |
| cash | 88200 | ||
2) Journal entry
| Date | account and explanation | Debit | Credit |
| Aug 15 | Account payable | 88200 | |
| Purchase discount forfeited | 1800 | ||
| Cash | 90000 |
3) Journal entry
| Date | account and explanation | Debit | Credit |
| July 15 | Merchandise inventory (3000*30*98%) | 88200 | |
| Account payable | 88200 | ||
| July 23 | Account payable | 88200 | |
| cash | 88200 | ||
2) Journal entry
| Date | account and explanation | Debit | Credit |
| Aug 15 | Account payable | 88200 | |
| Merchandise inventory | 1800 | ||
| Cash | 90000 |
On July 15, 2018, the Nixon Car Company purchased 3,000 tires from the Harwell Company for...