Question

Please make the following journal entries.

Mostly wondering if they are made under the discounted period or not?

1/08/18 Purchased $10,000 of inventory-guitars from Gary’s Guitars on account. The vendor extended credit terms are 2/15. n/30

1/18/18 Purchased additional guitars on account for $3,500 from Gary’s Guitars. Credit terms are 2/15, n/30.

1/23/18 Paid the balance due to Gary’s Guitars. There are two invoices; one on 01/08/18 and the other on 01/18/18. Make one journal entry for both transactions.

Answer 1

Note : 2/15. n/30 , means that 2 % discount is available only when the payment is made within 15 days . For 15 days calculation we need to include the date of purchase or invoice date as day 1 .

Thus for purchase made on 1/08/18 , the payment must be made on or before 1/22/18. to avail discount

Similarly ,  for purchase made on 1/18/18 , the payment must be made on or before 02/01/18. to avail discount

Therefore, as the full payment to Gary's Guitars is made on 1/23/18 , we will get discount on purchase made on 1/18/18 only.

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
1/08/18	Merchandise inventory	10,000
	Accounts payable		10,000
	[ To record purchase of inventory on account]
1/18/18	Merchandise inventory	3,500
	Accounts payable		3,500
	[ To record purchase of inventory on account]
1/23/18	Accounts payable [ 10,000 + 3,500 ]	13,500
	Cash		13,430
	Discount on purchase [ 3,500 * 2 %]		70
	[ To record ayment made to Gary’s Guitars for inventory purchased ]