Question

Return to question Part 1 of 2 Required information Exercise 8-11 (Static) Trade and purchase discounts; the gross method and the net method compared (LO8-3) The following information applies to the questions displayed below.) points Tracy Company, a manufacturer of air conditioners, sold 100 units to Thomas Company on November 17, 2021. The units have a list price of $500 each, but Thomas was given a 30% trade discount. The terms of the sale were 2/10, 1/30 Thomas uses a perpetual inventory system. Exercise 8-11 (Static) 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 is not complete. Complete this question by entering your answers in the tabs below. Required i Required 2 Prepare the journal entry for the payment, assuming instead that it was made on December 15, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Requirement 1:

Date	Account title and explanation	Debit	Credit
Nov 17	Inventory	$35,000
	Accounts payable (100 x ($500 x 0.70))		$35,000
	[To record purchase of inventory on account]
Nov 26	Accounts payable	$35,000
	Inventory [35,000 x 2%]		$700
	Cash		$34,300
	[To record payment for accounts payable]

Requirement 2:

Date	Account title and explanation	Debit	Credit
Dec 15	Accounts payable	$35,000
	Cash		$35,000
	[To record payment for accounts payable]

*Given that Terms 2/10, So No discount applied as it was paid after 10 days i.e. on Dec 15.

Requirement 3A:

Date	Account title and explanation	Debit	Credit
Nov 17	Inventory [35,000 x 0.98]	$34,300
	Accounts payable		$34,300
	[To record purchase of inventory on account]

*Under net method, Inventory should be recorded at net amount (it means after discount)

Requirement 3B:

Date	Account title and explanation	Debit	Credit
Nov 26	Accounts payable	$34,300
	Cash		$34,300
	[To record payment for accounts payable]