1. Wizard Industries purchased $13,100 of merchandise on February 1, 2012, subje
ID: 2379575 • Letter: 1
Question
1. Wizard Industries purchased $13,100 of merchandise on February 1, 2012, subject to a trade discount of 8% and with credit terms of 3/15, n/60. It returned $3,500 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13.
(b) Assuming that Wizard uses the periodic method for recording merchandise transactions, record the purchase, return, and payment using the gross method.
I need help journalizing these three transactions.
1. Feb. 1st ___________
____________
2. Feb 4th.____________
____________
3. Feb 13th ___________
___________
___________
(c) At what amount would the purchase on February 1 be recorded if the net method were used?
Net price = $_______
Explanation / Answer
(b) Assuming that Wizard uses the periodic method for recording merchandise transactions, record the purchase, return, and payment using the gross method.
FEB 1
Dr Merchandise Inventory 12052
Cr Accounts Payable 12052
FEB4
3,500 x 92% = 3220 return amount
Dr Accounts Payable 3220
Cr Purchase returns and allowances 3220
FEB 13
(12052- 3,220) x 3% =265 discount
Dr Accounts payable 8832
Cr Cash 8567
Cr Purchase discount 265
c)
12052 x 97% = 11690(approx) recorded cost of purchase
Dr Purchases 11690
Cr Accounts Payable 11690
3,220 x 97% = 3,123(approx) amount of return
Dr Accounts Payable 3,123
Cr Purchase Returns and Allowances 3,123
Dr Accounts Payable 8567
Cr Cash 8567
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