Question

1.) What is the entry to pay for the cost of the merchandise inventory bought for 1,000?

2.) What does this mean? 2/10, net/30

3.) What is the entry to pay for the cost of the merchandise inventory bought for 1,000 if the payment terms are 2/10, net/30 and we pay in 8 days?

4.) What is the entry to record the payment of a customer on account for merchandise inventory?

5.) What is the entry to record the payment of a customer on account for merchandise inventory for 5,000 if the payment terms are 2/10, net/30 and they pay in 8 days?

Answer 1

Solution

1. Entry to pay for the cost of the merchandise inventory bought for 1,000 –

Entry –

2. What does this mean – 2/10, net/30

This refers to the terms of on which the merchandise inventory is purchased from suppliers on account.

When inventory is purchased on account, 2/10 indicates that the customer would be granted a 2% discount on the cost of inventory if the payment is made within 10 days of purchase.

And when the customer could not make the payment within the 10-day discount period, the amount gets due for payment in 30 days (net/30). The payment to be made to supplier on 30^th day would be full payment without any discount.

3. Entry to pay for the cost the merchandise inventory bought for 1,000, if the payment terms are 2/10, net/30 and we pay in 8 days –

Entries –

4. Entry to record payment of a customer on account for merchandise inventory –

5. Entry to record the payment of a customer on account for merchandise inventory for 5,000 if the payment terms are 2/10, net/30 and they pay in 8 days: