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P has not yet revd the following inoice at 31st may 2009, the end of her fin. yr.
purhase invoice for inventory delivered on 28 may and included in the inventory count at 31st may.The items had a list price of $450.the supplier gives p a trade dicount of 8% and an early settlement disount of 2% for payment within 10 days of inoice.
WHAT AMOUNT SHLD BE INCLUDED IN PAYABLES FOR THESE ITES AT 31 MAY 09as I think it will be 450* 92%=414.
because it’s not said if settlement discount was taken or not. but I’m not sure.Quote:WHAT AMOUNT SHOULD BE INCLUDED IN PAYABLES FOR THESE ITEMS AT 31 MAY 2009Egyayaw !
Clearly, the double entry on the purchase of goods (on 28 May 2009) would be:
Dr. Purchases (net of trade T/Disc.) $414,
Cr. Accounts Payable $414However, P has not paid the amount due as at the year end, which is in this case 31 May 2009. Hence, the amount to be included in accounts payable would be $414.
If, P eventually pays within 10 days, the he will receive an early settlement discount of 2%. The double entry would be:
Dr. Accounts Payable $414
Cr. Discount Received 8
Cr. Cash $406HTH
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