Page 23 - Demo

CH(1): Journal entries %u2013Perpetual Inventory system20B-6) Purchase goods on account with discount:The credit terms of a purchase on account may permit the buyer to claim a cash discount for prompt payment. The buyer calls thiscash discount aMerchandise Inventory.This incentive offersadvantages to both parties: The purchaser saves money, and the seller shortens the operating cycle by more quickly converting the accounts receivable into cash.Illustration 1-7:On Jan,162020, SalmanCompany purchased merchandise from Emanof BD20,600, terms 2/10, n/30. It was recorded in the general journal:GENERAL JOURNALDateAccount Title and ExplanationPRDebitCreditJan,16Merchandise Inventory20,600Account Payable-Eman20,600Purchases goods on account-terms 2/10,n/302 /10, n/30If payment within10 days of the invoice date.2 % Cash DiscountPaid full due. If payment after 10 days, due in 30 days from the invoicedate.6-Explain the recording of purchasegoodsundera perpetual inventory without cash discount.