Purchase Discounts The following are transactions of Buckeye Corporation. July 3

Question

Purchase Discounts

The following are transactions of Buckeye Corporation. July 3 Purchased merchandise on credit from Wildcat Corp. for $3,500. July 6 Purchased merchandise on credit from Cyclone Company for $7,000. July 12 Paid amount owed to Wildcat Corp. August 5 Paid amount owed to Cyclone Company. Prepare the appropriate journal entries. (All purchases on credit are made with terms of 1/10, n/30, and Buckeye uses the periodic system of inventory.) For compound entries, if an amount box does not require an entry, leave it blank.

Explanation / Answer

1/10, n/30 means 1% discount if payemnt made within 10 days of purchase otherwise no discount and payment to be made within 30 days of purchase

Therefore purchase discount = 3500* 1% = 35

journal

accounts payable debit 3500, cash credit 3465, credit purcashe discount 35

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