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Please provide the formulas used to find purchase discount and cash. I do not understand how the answer was found. More info needed.

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Please provide the formulas used to find purchase discount and cash. I do not understand how the answer was found.

More info needed.

Answer:

General Journal:

Date

Accounts

Debit

Credit

May 12

Accounts Payable ($2,550 – $200)

2,350

Purchase Discounts

47

Cash ($2,350 x 98%)

2,303

 Company used the periodic inventory system for purchase & sales of merchandise. Discount terms for both purchase & sales are, FOB Destination, 2/10, n30 and the gross method is used.

Company purchased on account $2,550 of merchandise on May 2, 2016.

Company returned $200 of this merchandise on May 3, 2016.

Use this information to prepare compound General Journal entry for the payment for merchandise on May 12

 
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