Recording Cash Discounts

On November 15, 2015, Shields Company purchased inventory costing $11,000 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	CashInventoryAccounts Payable
	CashInventoryAccounts Payable
11/23	CashInventoryAccounts Payable
	CashInventoryAccounts Payable

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

Cash
	Answer	Answer

Inventory
	Answer	Answer

Accounts Payable
	Answer	Answer

c. Compute the cost of a lost discount as an annual percentage rate. Round answer to one decimal place (i.e., 34.6%).

Answer%