On July 15, 2021, the Nixon Car Company purchased 2,100 tires from the Harwell Company for $40 each. The terms of the sale were 3/10, n/30. Nixon uses a perpetual inventory system and the gross method of accounting for purchase discounts. Required: 1. Prepare the journal entries to record the purchase on July 15 and payment on July 23, 2021. 2. Prepare the journal entry for the payment, assuming instead that it was made on August 15, 2021.

Question

Business

Solomon Wolfe

20 April, 16:56

On July 15, 2021, the Nixon Car Company purchased 2,100 tires from the Harwell Company for $40 each. The terms of the sale were 3/10, n/30. Nixon uses a perpetual inventory system and the gross method of accounting for purchase discounts. Required: 1. Prepare the journal entries to record the purchase on July 15 and payment on July 23, 2021. 2. Prepare the journal entry for the payment, assuming instead that it was made on August 15, 2021.

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Answers (1)

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Paddy · Answer 1

The journal entries are shown below:

Explanation:

The journal entries are shown below:

On July 15

Purchases (2,100 * $40) $84,000

To Accounts Payable $84,000

(Being the purchase is recorded)

On July 23

Account payable $84,000

To Purchase discount $2,520 ($84,000 * 3%)

To Cash $81,480

(Being the payment is recorded)

On August 15

Account payable $84,000

To cash $84,000

(Being the payment is recorded)