Cash Discounts Olavssen Hardware regularly buys merchandise

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)

Solution

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)