Cruise Industries purchased $10,600 of merchandise on February 1, 2014, subject

Question

Cruise Industries purchased $10,600 of merchandise on February 1, 2014, subject to a trade discount of 9% and with credit terms of 3/15, n/60. It returned $2,800 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13.

Date

Account Titles and Explanation

Debit

Credit

Feb. 1

Feb. 4

Feb. 13

SHOW LIST OF ACCOUNTS

LINK TO TEXT

Date

Account Titles and Explanation

Debit

Credit

Feb. 1

Feb. 4

Feb. 13

SHOW LIST OF ACCOUNTS

LINK TO TEXT

Cruise Industries purchased $10,600 of merchandise on February 1, 2014, subject to a trade discount of 9% and with credit terms of 3/15, n/60. It returned $2,800 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13.

Explanation / Answer

1

Journal Entries (Periodic Gross Method)

Date

Accounts / Explanations

Debit

Credit

Feb. 1

Purchases (10600*(100%-9%))

$          9,646

Accounts Payable

$          9,646

(Being merchandise purchased on account)

Feb. 4

Accounts Payable (2800*(100%-9%))

$          2,548

Inventory

$          2,548

(Being merchandise returned)

Feb. 13

Accounts Payable = (9646-2548)

$          7,098

Purchase Discount (7098*3%)

$              213

Cash (7098-213)

$          6,885

(Being amount paid for invoice and cash discount received)

2

Journal Entries (Perpetual Gross Method)

Date

Accounts / Explanations

Debit

Credit

Feb. 1

Inventory (10600*(100%-9%))

$          9,646

Accounts Payable

$          9,646

(Being merchandise purchased on account)

Feb. 4

Accounts Payable (2800*(100%-9%))

$          2,548

Inventory

$          2,548

(Being merchandise returned)

Feb. 13

Accounts Payable = (9646-2548)

$          7,098

Inventory (7098*3%)

$              213

Cash (7098-213)

$          6,885

(Being amount paid for invoice and cash discount received)

3

Amount of Purchase to be recorded under Net method:

Gross Price

$        10,600

Less: Trade Discount = 10600*9%

$           (954)

Less: Cash Discount = 10600*3%

$           (318)

Amount of Purchase to be recorded

$          9,328

1

Journal Entries (Periodic Gross Method)

Date

Accounts / Explanations

Debit

Credit

Feb. 1

Purchases (10600*(100%-9%))

$          9,646

Accounts Payable

$          9,646

(Being merchandise purchased on account)

Feb. 4

Accounts Payable (2800*(100%-9%))

$          2,548

Inventory

$          2,548

(Being merchandise returned)

Feb. 13

Accounts Payable = (9646-2548)

$          7,098

Purchase Discount (7098*3%)

$              213

Cash (7098-213)

$          6,885

(Being amount paid for invoice and cash discount received)

2

Journal Entries (Perpetual Gross Method)

Date

Accounts / Explanations

Debit

Credit

Feb. 1

Inventory (10600*(100%-9%))

$          9,646

Accounts Payable

$          9,646

(Being merchandise purchased on account)

Feb. 4

Accounts Payable (2800*(100%-9%))

$          2,548

Inventory

$          2,548

(Being merchandise returned)

Feb. 13

Accounts Payable = (9646-2548)

$          7,098

Inventory (7098*3%)

$              213

Cash (7098-213)

$          6,885

(Being amount paid for invoice and cash discount received)

3

Amount of Purchase to be recorded under Net method:

Gross Price

$        10,600

Less: Trade Discount = 10600*9%

$           (954)

Less: Cash Discount = 10600*3%

$           (318)

Amount of Purchase to be recorded

$          9,328

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