Terry's Tree Removal paid cash on account to Sam's Sharpening Service, $735, covering Purchase Invoice No. 1415 for $750, less a 2% discount, $15. The journal entry for Terry's Tree Removal to record this transaction is:

Question

Business

Summer

28 April, 12:56

Terry's Tree Removal paid cash on account to Sam's Sharpening Service, $735, covering Purchase Invoice No. 1415 for $750, less a 2% discount, $15. The journal entry for Terry's Tree Removal to record this transaction is:

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Answers (2)

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Campbell Davidson · Answer 1

The journal entries necessary for the transactions are:

Dr Accounts payable $750

Cr Purchase discount $15

Cr Cash $735

Explanation:

The payment of $735 in settlement of payable account of $750 means that cash account has reduced by $735, a credit entry as well as an increase income discount on purchases of $15.

However, the payable accounts that has an invoice value of $750 is also reducing by $750 the value of the debt owed to the supplier, hence a debit is required to reverse the earlier recording of credit

Jamison Cisneros · Answer 2

Given:

Cash payment = $735

Discount = 2%

2% of $750

= $15

Invoice = $750

Invoice of $750 is the initial cost of Sam's sharpening services with the discount of 2% of the invoice cost is $735 cash payment made by Terry's Tree Removal.

Journal entry for Terry's Tree Removal:

Debit:

Accounts Payable/Sam's of sharpening Service = $750

Credit:

Purchases Discount = $15

Cash payment = $735