Explanation:
The journal entries are shown below:
On July 15:
Purchase A/c Dr $97,020
To Accounts payable $97,020
(By buying goods on credit with discount), the following are shown in the estimates of tire sales following application of the discount:
= Number of tires × price per tire - discount rate
= 2,200 tires × $45 - 2%
= $99,000 - $1,980
= $97,020
On July 23:
Account payable A/c Dr $97,020
To Cash A/c $97,020
(Being payment is made)
On August 15:
Account payable A/c Dr $97,020
Interest expense A/c Dr $1,980
To Cash A/c $99,000
(Being payment is made on late interval)
