Accounts Payable and Cash Discounts On January 4, 2013, Dunbar Company purchased
ID: 2480484 • Letter: A
Question
Accounts Payable and Cash Discounts
On January 4, 2013, Dunbar Company purchased, on credit, 2000 television sets at $500 each. Terms of purchase were 2/10, n/30. Dunbar paid for 20% of these sets on January 13 and the remaining 80% on February 1.
Prepare the journal entries on Dunbar Company's books, assuming that it uses the net price method to record its merchandise, (Dunbar uses a perpetual inventory system). For a compound transaction, if an amount box does not require an entry, leave it blankl or enter 0.
Explanation / Answer
(a) 13 Jan 2013
DR Accounts payable $200,000**
Cash $200,000
(To record partial payment of goods purchased on account)
**Since only 20% payment was made within 10 days (discount period), the discount cannot be availed and so, amount paid = $500 x 2,000 x 20%
(b) 1 Feb 2013
DR Accounts payable $800,000**
Cash $00,000
(To record balance payment of goods purchased on account)