Question

Sweet Industries purchased $11,300 of merchandise on February 1, 2017, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $2,600 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13. Assuming that Sweet uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method. (If no entry is required, select "No entry" for the account titles and enter o for the amounts. Round answers to o decimal places, e.g. 6,578. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit

Answer 1

Solution:

Perpetual method:

Date	Account titles and explanation	Debit	Credit
Feb 1 , 2017	Inventory [11,300 - (11,300 x 10%)]	10,170
	Accounts payable		10,170
Feb 4 , 2017	Accounts payable [ 2,600 - (2,600 x 10%)]	2,340
	Inventory		2,340
Feb 13 ,2017	Accounts payable (10,170 - 2,340)	7,830
	Inventory ( 7830 x 3%)		235
	Cash		7,595

Periodic Method:

Date	Account titles and explanation	Debit	Credit
Feb 1 , 2017	Purchases [11,300 - (11,300 x 10%)]	10,170
	Accounts payable		10,170
Feb 4 , 2017	Accounts payable [ 2,600 - (2,600 x 10%)]	2,340
	Purchase returns and allowances		2,340
Feb 13 ,2017	Accounts payable (10,170 - 2,340)	7,830
	Purchase discount ( 7830 x 3%)		235
	Cash		7,595

Calculation of net price if net method was used:

Purchase price	$ 11,300
Less: Trade Discount (10% x 11,300)	$ 1,130
Price on which cash discount is based	$ 10,170
Less: Cash Discount (3% x 10,170)	$ 305.1
Net Price	$ 9,865

Net Price

$ 9,865