24-25 Purchases, Returns, Allowances and Discounts

Marco Company purchased $1500 of merchandise with the terms 2/10 net 30

• Purchase price = 1,500

• Purchase discount % = 2%

• Purchase discount = Purchase price x Discount %

• Purchase discount = 1,500 x 2% = 30

• Amount to pay = Purchase price - Purchase discounts

• Amount to pay = 1,500 - 30 = 1,470

Purchase on Account:

At the time of Purchase Journal entry

DR Purchases $1,500

CR Accounts Payable $1,500

Marco Company purchased $1500 of merchandise with the terms 2/10 net 30

Purchase Allowance Granted:

Marco discovered that the equipment had some damage but they still want it, the manufacture gave them $100 allowance on this purchase.

​To Record this Allowance Transaction:

DR Accounts Payable $1,00

CR Purchases Returns & Allowances $100

Discount Taken:

Terms: $30/10 Net/30 Journal Entry when take discount.

DR Account Payable $1,400

CR Purchase Discount $30

Net Purchases

Purchase Discounts and Purchases Returns & Allowances are both contra-purchases accoutns and are subtracted to calculate net purchases.

​Purchases $1,500

Purchases Returns and Allowances $100

Purchase Discounts $30

Net Purchases $1,370