Accounts Payable and Cash Discounts On January 4, 2013, Dunbar Company purchased

Question

Accounts Payable and Cash Discounts On January 4, 2013, Dunbar Company purchased, on credit, 2,000 televisions sets at $500 each. Terms of the purchase were 2/10, n/30. Dunbar paid for 20% of these sets on January 13 and the remaining 80% on February 1. Prepare the journal entries on Dunbar Company's books, assuming that it uses the net price method to record its merchandise. (Dunbar uses a perpetual inventory system.) For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0".

Explanation / Answer

Date Particulars Debit Credit 4.01.2013 Purchases a/c {2000* (500*0.98)} 980000 To Accounts payable 980000 (To purchases recorded avaialing 2% discount as per net price method) 13.01.2013 Accounts payable (980000*20%) 196000 To Cash 196000 (To payament made for 20% of the units) 01.02.2013 Accounts payable (980000*80%) 784000 Purchases {(2000*80%) * (500*0.02)} 16000 To Cash 800000 (To payment made to creditors and discount availed reversed for 80% whose paymnet made after 10 days)

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