On March 5, 2020, Northwest Co. purchased $400,000 in merchandise on account with credit terms of 1/15, n/45. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $7,500. Merchandise with an invoice amount of $5,000 was returned for credit on March 12, 2020. Northwest paid the vendor for the amount owe on March 17, 2020. Assuming Northwest uses a perpetual inventory system and the gross method to record purchases, what journal entry would Northwest record for the payment made on March 17, 2020

In order to prepare the journal entry would Northwest record for the payment made on March 17, 2020, we have to calculate according to the given data the following:

Northwest Co. purchased $400,000 in merchandise on account with credit terms of 1/15, n/45, and Merchandise with an invoice amount of $5,000 was returned for credit on March 12, 2020, hence, ross amount due = Amount of purchase - return = $400,000-$5,000 = $395,000 will be debited to Accounts payable .

Discount will be allowed as payment made within 15 dyas , hence Discount will be = 1% of $395,000 = $3,950 which will be credited to inventory .

Net amount paid will be credit to cash = $395,000-$3,950 = $391,050.

Therefore, the journal entry would be as follows:

Debit Credit

Accounts payable $395,000

Cash $391,050

Inventory $3,950

Parrain Parrain · Answer 2 · 2021-11-19T15:04:51+01:00

Based on the purchases amount and the various other entries, the journal entry to reflect the payment would be:

Date Account Title Debit Credit

March 17 Accounts Payable $395,000

Cash $391,050

Inventory $3,950

Accounts Payable:

= Purchases - Purchase returns

= 400,000 - 5,000

= $395,000

Inventory:

= Discount if paid within discount period x Purchases

= 1% x 395,000

= $3,950

Cash:

= Accounts payable - Discount

= 395,000 - 3,950

= $391,050

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