Question

Tracy Company, a manufacturer of air conditioners, sold 140 units to Thomas Company on November 17, 2021. The units have a list price of $450 each, but Thomas was given a 20% trade discount. The terms of the sale were 2/10, n/30. Thomas uses a perpetual inventory system. 

Exercise 8-11 (Algo) Parts 1 and 2 

Required:

 1. Prepare the journal entries to record the (a) purchase by Thomas on November 17 and (b) payment on November 26, 2021. Thomas uses the gross method of accounting for purchase discounts.

 2. Prepare the journal entry for the payment, assuming instead that it was made on December 15, 2021.

Answer 1

Answer - Part - (1) -

	Date	Account Titles and Explanation	Debit ($)	Credit ($)
(a)	November 17, 2021	Inventory [(140 units * $450) - 20%] Accounts payable (To record the purchases)	50400 -	- 50400
(b)	November 26, 2021	Accounts payable Inventory [$50400 * 2%] Cash [Difference] (To record payment made)	50400 - -	- 1008 49392

.

Answer - Part - (2) -

Date	Account Titles and Explanation	Debit ($)	Credit ($)
December 15, 2021	Accounts payable Cash (To record payment made)	50400 -	- 50400