Question

Purchase Discounts (Gross vs. Net Methods) sample: Otto Carp purchased merchandise during 2014 on credit for $400,000 (2/10, 30). All of the Wann ennep 80,000 was paid within the discount period. The remainder was paid when the 30 de Oro uses a periodic inventory system Prepare the JAS sing the Gross Method de Ner Method Net Method Gross Method 392,000 392,000 Purchases Accounts Payable Purchases Accounts Pavable 400,000 400,000 Problem 2: Purchases Recorded Gross and Net Some of the transactions of Torres Company during August are listed below. Torres uses the periodic inventory method. August 10 Purchased merchandise on account, $12,000, terms 2/10, n/30. 13 Returned part of the purchase of August 10, $1,200, and received credit on account. 15 Purchased merchandise on account, $16,000, terms 1/10, 1/60 25 Purchased merchandise on account, $20,000, terms 2/10, 1/30. 28 Paid invoice of August 15 in full. Instructions (a) Assuming that purchases are recorded at gross amounts and that discounts are to be recorded when taken: 1. Prepare general journal entries to record the transactions. Purchases Allan Payable 12,0-0 12,000 Describe how the orient l

Answer 1

(a) Gross Method

Date	General Journal	Debit	Credit
August 10	Purchases	12000
	Accounts Payable		12000
	(To record merchandise purchased on account)
13	Accounts Payable	1200
	Purchase returns and allowances		1200
	(To record purchase returns)
15	Purchases	16000
	Accounts Payable		16000
	(To record merchandise purchased on account)
25	Purchases	20000
	Accounts Payable		20000
	(To record merchandise purchased on account)
28	Accounts Payable	16000
	Cash		16000
	(To record payment on account)