On July 15, 2018, the Nixon Car Company purchased 3,000 tires from the Harwell Company for...

On July 15, 2018, the Nixon Car Company purchased 3,000 tires from the Harwell Company for $30 each. The terms of the sale were 2/10, n/30. Nixon uses a periodic inventory system and the net method of accounting for purchase discounts.

Required:
1. Prepare the journal entries to record the purchase on July 15 and payment on July 23, 2018.
2. Prepare the journal entry to record the payment on August 15, 2018.
3. If Nixon instead uses a perpetual inventory system, explain any changes to the journal entries created in requirements 1 and 2.

Expert Solution

1) Journal entry

Date	account and explanation	Debit	Credit
July 15	Purchase (30003098%)	88200
	Account payable		88200

July 23	Account payable	88200
	cash		88200

2) Journal entry

Date	account and explanation	Debit	Credit
Aug 15	Account payable	88200
	Purchase discount forfeited	1800
	Cash		90000

3) Journal entry

Date	account and explanation	Debit	Credit
July 15	Merchandise inventory (30003098%)	88200
	Account payable		88200

July 23	Account payable	88200
	cash		88200

2) Journal entry

Date	account and explanation	Debit	Credit
Aug 15	Account payable	88200
	Merchandise inventory	1800
	Cash		90000

ekkarill92 answered 2 years ago

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