Question

Calculator Purchases Transactions Barans Company purchased merchandise on account from Springhill Company for $10,200, terms 2/10, n/30. Barans returned merchandise with an invoice amount of $2,100 and received full credit. a. If Barans Company pays the invoice within the discount period, what is the amount of cash required for the payment? If required, round the answer to the nearest dollar. b. What account is debited by Barans Company to record the return? Accounts Payable-Springhill Company Accounts Receivable Cash A Merchandise Inventory Purchases Sales Sales Returns and Allowances

Answer 1

(a) Terms 2/10, n/30 means that there will 2% discount if payment is made within 10 days of purchase.so,

Total invoice amount = $10200

Less: Sales return = $2100

Balance = $8100

Less: Doscount @ 2% = $8100 * 2% = $162

Cash paid = $8100 - $162 = $7938

(b) Barans Company will debit Accounts payable - Springhill company, to record the return. Required journal entry is:

Debit Accounts payable - Sprinhill company

Credit Purchase return