Question

Tracy Company, a manufacturer of air conditioners, sold 260 units to Thomas Company on November 17, 2021. The units have a list price of $250 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.

 3. Prepare the journal entries to record the purchase by Thomas on November 17 and payment on November 26, 2021 and December 15, 2021 using the net method of accounting for purchase discounts.

Answer 1

1) Journal entry

Date	account and explanation	Debit	Credit
Nov 17	Merchandise inventory (260*250*80%*98%)	50960
	Account payable		50960
	(To record purchase)
Nov 26	Account payable	50960
	Cash		50960
	(To record amount paid)

b) Journal entry

Date	account and explanation	Debit	Credit
Dec 15	Account payable	50960
	Merchandise inventory	1040
	Cash		52000
	(To record amount paid)