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Prepare journal entries to record each of the following transactions of a merchandising company....

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Prepare journal entries to record each of the following transactions of a merchandising company. The company uses a perpetual inventory system and the gross method.

Nov. 5Purchased 850 units of a product at a cost of $10 per unit. Terms of the sale are 3/10, n/60; the invoice is dated November 5
Nov. 7Returned 30 defective units from the November 5 purchase and received full credit
Nov. 15Paid the amount due from the November 5 purchase, less the return on November 7

Discount:

Providing discounts is considered a marketing tool in order for customers to patronize the products offered. Such discounts can be in the form of cash discounts, trade discounts, and the like.

Answer and Explanation: 1

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Using a perpetual inventory system and the gross method, the above transactions must be recorded in the book of merchandising company as follows.

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Cash Discount: Definition, Formula & Example

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Chapter 1 / Lesson 11
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Learn what a cash discount is. See the differences between trade discount and cash discount. Find examples to understand the accounting treatment of a cash discount.


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