Question

7-9. Recording inventory with discounts available. Greystoke, Inc. is owned by twin brothers. On most issues, they aree completely with each other. One particular problem, though, is giving them trouble. Galen wants to use the gross method for recording purchases of merchandise with discounts while Gordon thinks the only logical method is the net method. To help them resolve their problems, they need to see the information each method gives them and get some feedback on what they can learn from each method. You have the honor of being chosen. Provide journal entries to record each activity for both the gross and net methods. Be sure to label the methods. The entries can be side by side for the two inventory methods. Assume the brothers use the periodic inventory system. May 2 Gross Purchased and received $15.000 of merchandise, terms 1/15, n/45. Net May 5 Returned merchandise with a cost of $500 because we could not use it. Net Gross May 16 Gross Paid for $10,000 of the merchandise. Net Paid June 12 Gross Paid for the remainder of the merchandise. Net

Answer 1

	Gross			Net
02-May	Purchases    Dr.	15000		Purchases    Dr.	12750
	Discount Received Cr.	2250		Creditors A/C Cr.	12750
	Creditors A/C Cr.	12750
05-May	Creditors A/C Dr.	425		Creditors A/C Dr.	425
	Discount Received Cr.	75		Purchase Returns Cr.	425
	Purchase Returns Cr.	500
16-May	Creditors A/C Dr.	10000		Creditors A/C Dr.	10000
	Bank A/C Cr.	10000		Bank A/C Cr.	10000
12-Jun	Creditors A/C Dr.	2325		Creditors A/C Dr.	2325
	Bank A/C Cr.	2325		Bank A/C Cr.	2325