Amarillo Company experienced the following events during its first accounting period. (1) Purchased $5,000 of inventory...
Amarillo Company experienced the following events during its first accounting period. (1) Purchased $5,000 of inventory on account under terms 1/10/n30. (2) Returned $1,000 of the inventory purchased in Event 1. (3) Paid the remaining balance in accounts payable within the discount period for the inventory purchased in Event 1. Based on this information the journal entry necessary to record the purchase discount is
Homework Answers
Solution:
Purchase Discount = ($5000 - $1000) *1% = $40
Entry to record Discount is as under:
| Journal Entries | |||
| S.No | Particulars | Debit | Credit |
| 3 | Accounts Payable Dr ($5000-1000) | $4,000 | |
| To Inventory ($4000*1%) | $40 | ||
| To Cash | $3,960 | ||
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