Santa Fe Retailing purchased merchandise "as is" (with no returns) from Mesa Wholesalers with credit terms of 3/10, n/60 and an invoice price of $24,000. The merchandise had cost Mesa $16,000. Assume that both buyer and seller use a perpetual inventory system and the gross method.

1. Prepare entries that the buyer records for the (a) purchase, (b) cash payment within the discount period, and (c) cash payment after the discount period.

(a) Credit Purchase

Merchandise inventory = $24,000 (Debit)
Accounts payable = $24,000 (Credit)

(b) Cash payment within the discount period

Accounts payable = $24,000 (Debit)
Merchandise inventory = $720 (Credit)
Cash = $24,000 * (100% - 3%) = $23,280 (Credit)

(c) Cash payment after the discount period

Accounts payable = $24,000 (Debit)
Cash = $24,000 (Credit)

2. Prepare entries that the seller records for the (a) sale, (b) cash collection within the discount period, and (c) cash collection after the discount period.

(a) Credit sale

Accounts receivables = $24,000 (Debit)
Sales = $24,000 (Credit)

COGS entry

Cost of goods sold = $16,000 (Debit)
Merchandise inventory = $16,000 (Credit)

(b) Cash collection within the discount period

Cash = $24,000 * (100% - 3%) = $23,280 (Debit)
Sales discount = $720 (Debit)
Accounts receivable = $24,000 (Credit)

(c) Cash collection after the discount period

Cash = $24,000 (Debit)
Accounts receivable = $24,000 (Credit)

anthougo anthougo · Answer 2 · 2022-01-25T13:51:32+01:00

The entries by both Santa Fe Retailing and Mesa Wholesalers will be as follows:

Journal Entries:

1. Santa Fe Retailing:

(a) purchase:

Debit Inventory $24,000

Credit Accounts Payable (Mesa Wholesalers) $24,000

Credit terms of 3/10, n/60

(b) cash payment within the discount period:

Debit Accounts Payable (Mesa Wholesalers) $24,000

Credit Cash Discounts $720

Credit Cash $23,280

(c) cash collection after the discount period

Debit Accounts Payable (Mesa Wholesalers) $24,000

Credit Cash $24,000

2. Mesa Wholesalers:

(a) sale:

Debit Accounts Receivable (Santa Fe Retailing) $24,000

Credit Sales Revenue $24,000

Debit Cost of goods sold $16,000

Credit Inventory $16,000

(b) cash collection within the discount period:

Debit Cash Discounts $720

Debit Cash $23,280

Credit Accounts Receivable (Santa Fe Retailing) $24,000

(c) cash payment after the discount period:

Debit Cash $24,000

Credit Accounts Receivable (Santa Fe Retailing) $24,000

Data Analysis:

1. Santa Fe Retailing:

(a) purchase:

Inventory $24,000 Accounts Payable (Mesa Wholesalers) $24,000

Credit terms of 3/10, n/60

(b) cash payment within the discount period:

Accounts Payable (Mesa Wholesalers) $24,000 Cash Discounts $720 Cash $23,280

(c) cash collection after the discount period

Accounts Payable (Mesa Wholesalers) $24,000 Cash $24,000

2. Mesa Wholesalers:

(a) sale:

Accounts Receivable (Santa Fe Retailing) $24,000 Sales Revenue $24,000

Cost of goods sold $16,000 Inventory $16,000

(b) cash collection within the discount period:

Cash Discounts $720 Cash $23,280 Accounts Receivable (Santa Fe Retailing) $24,000

(c) cash payment after the discount period:

Cash $24,000 Accounts Receivable (Santa Fe Retailing) $24,000

Question Requirements:

1. Prepare entries that the buyer records for the (a) purchase, (b) cash payment within the discount period, and (c) cash payment after the discount period.

2. Prepare entries that the seller records for the (a) sale, (b) cash collection within the discount period, and (c) cash collection after the discount period.

Thus, the journal entries that Santa Fe Retailing and Mesa Wholesalers will record under the perpetual inventory system and the gross method are as above.

Learn more about recording entries under the perpetual inventory system and gross method for discounts at https://brainly.com/question/16955566