The debits and credits for four related entries for a purchase of $40,000, terms 2/10, n/30, are presented in the following T accounts

The debits and credits for four related entries for a purchase of $40,000, terms 2/10, n/30, are presented in the following T accounts. Describe each transaction.

Cash

 | (2) 450

 | (4) 34,300

Accounts Payable

(3)  4,900 | (1) 39,200

(4) 34,300 |

Merchandise Inventory

(1) 39,200 | (3) 4,900

(2)    450 |

Answer:

(1) Purchased merchandise on account at a cost of $39,200, which is $40,000 less the 2% discount of $800.

(2) Paid freight, $450.

(3) An allowance or return of merchandise was granted by the creditor, $4,900,which is a $5,000 invoice amount less the 2% discount of $100.

(4) Paid the balance due within the discount period: debited Accounts Payable, $34,300, which is $39,200 less the return of $4,900.