Question

On August 1, Greene Company purchased merchandise inventory on account with a list price of $25,000 and credit terms of 2/10, n/30. What is the correct journal entry to record the August 1 purchase?

Answer 1

August 1, merchandise purchased on account 2/10, n/30

Dr Merchandise inventory 25,000

Cr Accounts payable 25,000

Step-by-step explanation:

If Greene paid within the discount period, the journal entry to record the payment would be:

August 2-11, payment of accounts payable

Dr Accounts payable 25,000

Cr Cash 24,500

Cr Purchase discounts 500

If Greene didn't paid within the discount period, the journal entry to record the payment would be:

August 20, payment of accounts payable

Dr Accounts payable 25,000

Cr Cash 25,000