Question

Suppose Sports-R-Us purchases $60,000 of sportswear on account from Northeast Trail, Inc., on December 1, 2018. Credit terms are 2/10, net 30. Sports-R-Us pays Northeast Trail, Inc., on December 8, 2018 1. Journalize the transactions for Sports-R-Us on December 1, 2018, and December 8, 2018, assuming the "net" method is used. 2. What was the final cost of this inventory for Sports-R-Us? 1. Journalize the transactions for Sports-R-Us on December 1, 2018, and December 8, 2018, assuming the "net" method is used (Record debits first, then credits. Exclude explanations from any journal entries.) December 1: Purchases $60,000 of sportswear on account. Journal Entry Date Accounts Debit Credit Dec 1 December 8: Paid Northeast Trail, Inc.. Journal Entry Accounts Date Debit Credit Dec 8 2. What was the final cost of this inventory for Sports-R-Us? The final cost of the inventory for Sports-R-Us was $

Answer 1

1. Journalizing the transactions for Sports - R - Us assuming 'Net Method ' is used

JOURNAL ENTRY

Date	Accounts	Debit	Credit
Dec1	Merchandise inventory	$58800
	Accounts payable		$58800
	(To record the purchases on acount)
Dec8	Accounts payable	$58800
	Cash		$58800
	(To record the payment within the discount period)

Under Net method,

While recording the purchase entry, it is to be assumed that the payment will be made within the credit period and the amount should be recorded after deducting the discount amount.

Amount of discount, if the payment is within the credit period of 10 days

= purchase value × discount rate as per credit terms

= $60000 × 2%

= $1200

So, The net purchases = $60000 - $1200 = $58800

2. The final cost of this inventory for Sports - R - Us was

• $58800

*There is no change in the final cost as the payment has been made within the credit period of 10 days. It may varies if the payment gets delay and paid after credit period.

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