Question

Blossom Industries purchased $9,000 of merchandise on February 1, 2020, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $2,900 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13. New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct. Assuming that Blossom 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 0 for the amounts. Round answers to 0 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 eTextbook and Media List of Accounts New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct. Assuming that Blossom uses the periodic 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 0 for the amounts. Round answers to 0 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 eTextbook and Media List of Accounts New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect. At what amount would the purchase on February 1 be recorded if the net method were used? (Round answer to 0 decimal places, e.g. 6,578.) Net price $

Answer 1

Solution:

(a) Purchase Recorded Using Perpetual Method

Feb. 1                    Inventory ($9,000 – (9,000 x 10%))                           8,100

                                                Accounts Payable                                                                            8,100

Feb. 4                    Accounts Payable ($2,900 x (2,900 x 10%))            2,610

                                                Inventory                                                                                            2,610

Feb.13                 Accounts Payable ( $8,100 - $2,610)                         5,490

                                                Inventory ($5,490 x 3%)                                                                        165

                                                Cash                                                                                                   5,325

(b) Purchase Recorded Using Periodic Method

Feb. 1                    Purchases ($9,000 – (9,000 x 10%))                           8,100

                                                Accounts Payable                                                                            8,100

Feb. 4                    Accounts Payable ($2,900 x (2,900 x 10%)) 2,610

                                                Purchase Returns and Allowances 2,610

Feb.13                 Accounts Payable ( $8,100 - $2,610) 5,490

                                                Purchase Discounts ($5,490 x 3%) 165

                                                Cash                                                                                                5,325

(b) Purchase Recorded using Net Method

Purchase Price (List)                                                       $9,000

Less: Trade Discount (9,000 x 10%) $900

Price on Which cash Discount is Allowed $8,100

Less: Cash Discount ($5,490 x 3%) $165

Net Price $7,935

Feb. 1                    Inventory                                                                            7,935

                                                Accounts Payable                                                                            7,935

Feb.13                 Accounts Payable ( $8,100 - $2,610) 7,935

                                                Cash                                                                                                7,935

If not paid by Feb.13, 2020

Feb.28                 Accounts Payable                                                            8,100

                                                Cash                                                                                              8,100

Feb.28                  Purchase Discounts Lost (inventory) 165

                                                Accounts Payable 165