Question

Presented below are transactions related to Tom Brokaw, Inc. and Dan Rather Corp. Dan Rather offers cash discount terms of 2/10, n/30 to its customers.

May 10	Tom Brokaw purchased goods from Dan Rather for $15,000. The cost of the goods to Dan Rather is $3,000.
11	Tom Brokaw returned $1,500 of goods to Dan Rather (cost = $300).
19	Tom Brokaw paid the May 10 purchase, net of returns.
20	Tom Brokaw purchased goods from Dan Rather for $13,200. The cost of the goods to Dan Rather is $2,000.

As of May 31, Tom Brokaw has not paid Dan Rather for the May 20 purchase.

Journalize the month's transactions assuming the use of a perpetual inventory system under the net method. Date Account Debit Credit TOM BROKAW Date Account Debit Credit DAN RATHER

Answer 1

2/10 N 30 is a method of offering a cash discount to a company's clients in an effort to get them to pay early. A discount of 2% is given if payment is made within 10 days. But if payment is made between 10 and 30 days of the invoice date, the net invoice amount has to be paid.

Tom Brokaw paid the May 10 purchase, net of returns. DISCOUNT ALLOWABLE 2%

As of May 31, Tom Brokaw has not paid Dan Rather for the May 20 purchase. SO NO DISCOUNT IS ALLOWABLE

TOM BROKAW
DATE	ACCOUNT	DEBIT	CREDIT
May-10	INVENTORY A/C	15000
	DAN RATHER A/C		15000
	(being purchased goods for credit)
May-11	DAN RATHER A/C	1500
	INVENTORY A/C		1500
	(being goods returned)
May-19	DAN RATHER A/C	13500
	INVENTORY A/C		270
	CASH A/C		13230
	(being balance cash paid after deducting purchase return and discount received $270)
May-20	PURCHASE A/C	13200
	DAN RATHER A/C		13200
	(purchased goods for credit)

DAN RATHER
DATE	ACCOUNT	DEBIT	CREDIT
May-10	TOM BROKAW A/C	15000
	SALES A/C		15000
	(being sold goods for credit)
	COST OF GOODS SOLD A/C	3000
	INVENTORY A/C		3000
	(cost of goods sold)
May-11	SALES RETURN A/C	1500
	TOM BROKAW A/C		1500
	(goods returned from tom brokaw)
	INVENTORY A/C	300
	COST OF GOODS SOLD A/C		300
	(cost of goods returned)
May-19	CASH A/C	13230
	DISCOUNT ALLOWED A/C	270
	TOM BROKAW A/C		13500
	(balance amount received after allowing cash disvount 2%)
May-20	TOM BROKAW A/C	13200
	SALES A/C		13200
	(being sold goods for credit)
	COST OF GOODS SOLD A/C	2000
	INVENTORY A/C		2000
	(cost of goods sold)