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28 September, 20:17

X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it purchased $400 of merchandise on account with terms of 2/15, n/40. On May 3, X-Mart returned $50 of merchandise due to defect. Assuming that the purchase was paid for within the discount period, demonstrate the required journal entry for X-Mart to record the payment

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  1. 28 September, 20:18
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    The journal entry is shown below:

    Account payable A/c Dr $350

    To Cash A/c Dr $343

    To Merchandise inventory A/c $7

    (Being the amount is paid)

    The computation is shown below:

    Account payable = Purchase of inventory amount - returned goods

    = $400 - $50

    = $350

    Cash Account = Account payable * discount rate

    = $350 * 2%

    = $7

    And, the remaining amount will be credited to the cash account
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