Question

Dunbar Company sells electronics and on January 4, 2016, purchased 2,500 television sets at $800 each, on credit. Terms of the purchase were 2/10, n/30. Dunbar paid for 20% of these sets on January 13 and the remaining 80% on February 1. Required: 1. Prepare the journal entries on Dunbar Company’s books, assuming that it uses the net price method to record its merchandise. (Dunbar uses a perpetual inventory system.)

Answer 1

Answer:

Explanation:

The journal entries are shown below:

On January 4

Merchandise inventory A/c Dr $1,960,000        

         To Accounts payable A/c  $1,960,000

(Being the inventory is purchased on credit)

The computation is shown below:

= 2,500 television sets × $800 × 98%

= $1,960,000        

The value is come after considering the discount i.e 100% - 2% = 98%

On January 13

Accounts payable A/c Dr $392,000

            To Cash A/c $392,000

(Being the amount is paid)

The computation is shown below:

= 2,500 television sets × $800 × 98% × 20% sets payment

= $392,000

On February 1

Accounts payable A/c Dr $1,568,000

Discount A/c Dr $32,000    

                     To Cash A/c $1,600,000

The computation is shown below:

For Account payable

= 2,500 television sets × $800 × 98% × 80% sets payment

= $1,568,000

For Discount

= 2,500 television sets × $800 × 2% × 80% sets payment

= $1,568,000