Question

On July 15, 2021, the Nixon Car Company purchased 1,500 tires from the Harwell Company for $46 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.

Answer 1

1
		Debit	Credit
July 15, 2021	Inventory	69000		=1500*46
	Accounts payable		69000
July 23, 2021	Accounts payable	69000
	Inventory		2070	=69000*3%
	Cash		66930
2
August 15, 2021	Accounts payable	69000
	Cash		69000