Cash Discounts Olavssen Hardware regularly buys merchandise from Dawson Supplier

Question

Cash Discounts Olavssen Hardware regularly buys merchandise from Dawson Suppliers Olavssen uses the net method to record purchases and discounts. On August 15, Olavssen Hardware purchased material from Daw son Suppliers. The invoice received from Dawson showed an invoiced price of $15,536 and payment terms of 2/10, n/30. Payment was sent to Dawson Suppliers on August 28. Prepare entries to recored the purchase and subsequent payment assuming a periodic inventory system. (Note: Round to near est dollar)

Explanation / Answer

Note : 2/10 , n/30 means 2 % discount if payment is made with in 10 days or else the total amount is due in 30 days

Date Accounts titles & Explanation Debit ($) Debit ($) 15 - 08 Purchases ($15,536 * 98 %) 15,225 Accounts Payable 15,225 (Being purchase made) 28 - 08 Accounts Payable 15,225 Purchase Discounts Lost 311 Cash 15,536 (Being payment made after discounting period)

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