Question

You purchase 8 pallets of patio stone on account at a cost of $200 per pallet with a 20% contractor discount. You will pay in three installments. How much will the entry for the first installment payment be?

Answer 1

Answer:

The journal entries should be as follows:

Day 1, you purchase the materials (8 pallets x $200 x 80%)

• Dr Materials Inventory account 1,280
• Cr Accounts Payable account 1,280

Day 31, you pay the first installment (= $1,280 / 3)

• Dr Accounts Payable account 426.67
• Cr Cash account 426.67

Day 61, you pay the second installment (= $853.33 - $426.66)

• Dr Accounts Payable account 426.67
• Cr Cash account 426.67

Day 91, you pay the third installment

• Dr Accounts Payable account 426.66
• Cr Cash account 426.66