Question

Tracy Company, a manufacturer of air conditioners, sold 110 units to Thomas Company on November 17, 2021. The units have a list price of $400 each, but Thomas was given a 20% trade discount. The terms of the sale were 3/10, 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

WORKING NOTES:
	CALCULATION OF NET VALUE OF PURCHASE OF AIR CONDITTIONES
		List price =	$                    400.00
		Less: 20% Trade discount	$                       80.00
		Net purhcase Price	$                    320.00
		No. of units Purchase	110
		Purchase Price	$              35,200.00
		Less:Purchase discount 3%	$                 1,056.00
		Net Pruchase price	$              34,144.00
SOLUTION :
Journal Entries
Sr. No.	Date	Account Title and explanation	Debit	Credit
1	Nov 17 , 2021	Purchase	$34,144
		Accont Payable		$34,144
	If Paid as on Nov 26, 2021
	Nov 26, 2021	Account Payable	$34,144
2		Cash		$34,144
	If Paid as on Dec 15, 2021
3		Account Payable	$34,144
		Loss on purchase discount	$1,056
		Cash		$35,200