Help with Accounting Question- Reporting Purchase Discounts?

During the month of June, Ace Incorporated purchased goods from two suppliers. The sequence of events was as follows:

JUNE 3- Purchased goods for $2,200 from Zip Inc. with terms 2/10, n/30

JUNE 5- Returned goods costing $1,200 to Zip Inc. for full credit

JUNE 6- Purchased goods from Nadda Corp. for $2000 with terms 2/10, n/30

JUNE 11- Paid the balance owed to Zip

JUNE 22- Paid Nadda in full.

Ace uses a perpetual inventory system. Calculate the cost of inventory as of June 30 assuming they have no inventory at the beginning of the month. Dis ace take advantage of all purchase discounts available to it?

Basically, I assume this would be a general journal but I'm confused by the accounts since I don't know how to work with the discounts. I've used them on Accounts Receivable, but never on a question like this. I know they didn't take advantage of all discounts (Nadda was paid too late) but I don't know how to do the entries basically. I'm not sure the accounts to use.

How would this look? How do I list the discounts?

2 Answers

Relevance
  • JKRB
    Lv 7
    9 years ago
    Favorite Answer

    JUNE 3- Purchased goods for $2,200 from Zip Inc. with terms 2/10, n/30

    Dr Merchandise Inventory 2,200

    Cr Accounts Payable 2,200

    JUNE 5- Returned goods costing $1,200 to Zip Inc. for full credit

    Dr Accounts Payable 1,200

    Cr Merchandise Inventory 1,200

    JUNE 6- Purchased goods from Nadda Corp. for $2000 with terms 2/10, n/30

    Dr Merchandise Inventory 2,000

    Cr Accounts Payable 2,000

    JUNE 11- Paid the balance owed to Zip

    Dr Accounts Payable 800

    Cr Merchandise Inventory 16 (800 x 2%)

    Cr Cash 784

    JUNE 22- Paid Nadda in full.

    Dr Accounts Payable 2,000

    Cr Cash 2,000 (no discount)

    Cost of inventory = 2,000 - 1,200 + 2,000 - 16 = 2,784

    • Commenter avatarLogin to reply the answers
  • 4 years ago

    Flint Co. records purchase discounts lost and uses perpetual inventories. Prepare journal entries in general journal form for the following:

    Purchased merchandise costing $2,500 with terms 2/10, n/30.

    • Commenter avatarLogin to reply the answers
Still have questions? Get your answers by asking now.