Santa Fe Retailing purchased merchandise “as is” (with no returns) from Mesa Who

Question

Santa Fe Retailing purchased merchandise “as is” (with no returns) from Mesa Wholesalers with credit terms of 3/10, n/60 and an invoice price of $24,900. The merchandise had cost Mesa $16,982. Assume that both buyer and seller use a perpetual inventory system and the gross method.

1. Prepare entries that the buyer records for the (a) purchase, (b) cash payment within the discount period, and (c) cash payment after the discount period.
2. Prepare entries that the seller records for the (a) sale, (b) cash collection within the discount period, and (c) cash collection after the discount period.

Journal entry worksheet

Record Santa Fe Retailing purchased merchandise “as is” (with no returns) from Mesa Wholesalers with credit terms of 3/10, n/60 and an invoice price of $24,900.

Record the merchandise had cost Mesa $16,982.

Record cash received within discount period.

Record cash received after discount period.

Note: Enter debits before credits.

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Explanation / Answer

Solution 1:

Solution 2:

Journal Entries - Santa Fe Retailing Date Particulars Debit Credit a Inventory A/c Dr $24,900.00       To Accounts Payable $24,900.00 (Being inventory purchased on credit) b Accounts Payable Dr $24,900.00       To Cash ($24,900*97%) $24,153.00       To Purchase Discount ($24,900*3%) $747.00 (Being payment made to creditors and discount availed) c Accounts Payable Dr $24,900.00       To Cash $24,900.00 (Being payment made to creditors after discount period

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