Recording Cash Discounts

On November $15,2015,$ Shields Company purchased inventory costing $$12,400$ on credit. The credit terms were $1/10,$ n$//30.$

a$.$ Assume that Shields Company paid the invoice on November $23,2015.$ Prepare journal entries to record the purchase of this inventory and the cash payment to the supplier using the net$-$of$-$discount method.

General Journal

Date Description Debit Credit

$11/15$

$11/23$

b$.$ Set up the necessary T$-$accounts and post the journal entries from question a$.$ to the accounts.

Cash

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Inventory

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Accounts Payable

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c$.$ Compute the cost of a lost discount as an annual percentage rate. Round answer to one decimal place $($i$.$e$.,34\mathrm{.}6\%).$

Answer$\%$