Dublin Company uses the periodic inventory system. On February 1, the company purchased inventory on account for $11,000. The terms were 4/10, n/30. On February 2, it returned damaged goods worth $500 to the supplier. Give the journal entry for the payment if the invoice is paid after the discount period.

Accounts Payables $10,500 (debit)

Cash  $10,500 (credit)

Explanation:

It is important to remember that in periodic method, inventory valuation is done at financial year end.

The summary of events in form of journals are as below :

February 1

Purchases $11,000 (debit)

Accounts Payables $11,000 (credit)

February 2

Accounts Payables $500 (debit)

Purchases Returns $500 (credit)

Payment

Accounts Payables $10,500 (debit)

Cash  $10,500 (credit)

Note : If the invoice is paid after the discount period, Dublin Company is not eligible for a cash discount and pays the full amount owing less the return that was previously made.

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