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

September 15	Purchased merchandise with an invoice price of $67,500 and credit terms of 3/5, n/15.
September 29	Paid supplier the amount owed on the September 15 purchase.

Here are the journal entries for the transactions you provided:

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**Transaction 1:**  
**Date:** September 15  
**Description:** Purchased merchandise with an invoice price of $67,500 and credit terms of 3/5, n/15.  
**Journal Entry:**

| Date          | Account              | Debit       | Credit      |
|---------------|----------------------|-------------|-------------|
| September 15  | Merchandise Inventory | $67,500     |             |
|               | Accounts Payable      |             | $67,500     |

*Explanation:* Merchandise inventory is debited to reflect the purchase of goods, and accounts payable is credited, as the payment has not yet been made.

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**Transaction 2:**  
**Date:** September 29  
**Description:** Paid supplier the amount owed on the September 15 purchase within the discount period. The discount is 3% (3/5 terms).  
**Journal Entry:**

1. **Calculate the discount:**  
   Discount = Invoice price * Discount rate  
   Discount = $67,500 * 3% = $2,025  

2. **Record the payment:**

| Date          | Account              | Debit       | Credit      |
|---------------|----------------------|-------------|-------------|
| September 29  | Accounts Payable      | $67,500     |             |
|               | Cash                  |             | $65,475     |
|               | Merchandise Inventory |             | $2,025      |

*Explanation:* Accounts payable is debited to eliminate the liability, cash is credited for the amount paid after the discount, and merchandise inventory is credited for the discount amount, reducing the cost of the inventory.

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Would you like more detailed explanations or have any questions about these entries?

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Here are some related questions for practice:

1. What would the entry look like if the company missed the discount period and paid the full invoice price on September 29?
2. How would the entries differ if the company used the net method instead of the gross method for purchases?
3. What effect does taking the purchase discount have on the cost of goods sold?
4. How would you record a return of merchandise if it occurred before the payment on September 29?
5. Why is merchandise inventory credited in the second entry?

**Tip:** Discounts taken on purchases reduce the cost of inventory in a perpetual system.

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

September 15 Purchased merchandise with an invoice price of $67,500 and credit terms of 3/5, n/15.
September 29 Paid supplier the amount owed on the September 15 purchase.

Learn how to prepare journal entries for a merchandise purchase using the gross method and a perpetual inventory system. This example covers a $67,500 purchase with terms of 3/5, n/15, and payment within the discount period. Suitable for Grades 11-12 or college-level accounting students.

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