Purchase Entries B38D3B

1. **State the problem:** We need to prepare journal entries for Santa Fe Retailing's purchase of merchandise costing $24,700 with credit terms 3/10, n/60. 2. **Understand the terms:** - 3/10 means a 3% discount is available if payment is made within 10 days. - n/60 means the net (full) amount is due within 60 days. 3. **(a) Record the purchase:** The purchase is recorded at the invoice price since it is "as is" with no returns. $$\text{Merchandise Inventory} = 24,700$$ Journal entry: - Debit Merchandise Inventory $24,700$ - Credit Accounts Payable $24,700$ 4. **(b) Cash payment within the discount period:** If payment is made within 10 days, a 3% discount applies. Calculate discount: $$\text{Discount} = 24,700 \times 0.03 = 741$$ Calculate payment amount: $$\text{Payment} = 24,700 - 741 = 23,959$$ Journal entry: - Debit Accounts Payable $24,700$ - Credit Cash $23,959$ - Credit Merchandise Inventory $741$ (to reduce inventory cost by discount) 5. **(c) Cash payment after the discount period:** If payment is made after 10 days but within 60 days, no discount applies. Journal entry: - Debit Accounts Payable $24,700$ - Credit Cash $24,700$ This completes the required journal entries for the purchase and payments.