Q 5.24: crump company purchased $1,850 worth of inventory on account from payne industries on may 8th. the terms were 3/15, n/eom. crump also paid freight charges of $95 on may 9th. payne granted crump a $150 purchase allowance for slightly damaged goods. prepare the journal entry on may 17th when crump pays the invoice in full.

Given:

MAY 8 - Crump company purchased $1,850 worth of inventory on account from Payne industries; the terms were 3/15, n/eom.

MAY 9 - Crump also paid freight charges of $95

Payne granted crump a $150 purchase allowance

MAY 17 - Payment in full

Debit Credit

May 8.

Purchases 1,850

Accounts Payable 1,850

May 9

Freight-In 95

Cash 95

Accounts Payable 150

Purchase returns and allowance 150

May 17 - Payment goes beyond the discounting period. No discount is given.

Accounts Payable 1,700

Cash 1,700

(1,850 - 150 = 1,700)

"3/15, n/eom" This means that Crump can avail 3% discount when it pays on the 15th of the month and n discount when it pays at the end of the month.