Cruise Industries purchased $11,100 of merchandise on February 1, 2014, subject

Question

Cruise Industries purchased $11,100 of merchandise on February 1, 2014, subject to a trade discount of 9% and with credit terms of 3/15, n/60. It returned $3,400 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13.

Assuming that Cruise uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method.

Assuming that Cruise uses the periodic method for recording merchandise transactions, record the purchase, return, and payment using the gross method.

At what amount would the purchase on February 1 be recorded if the net method were used?

Explanation / Answer

Note: Purchases are always recorded net of net of trade discounts regardless of What Type of method is used.

Assuming that Cruise uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method

Assuming that Cruise uses the periodic method for recording merchandise transactions, record the purchase, return, and payment using the gross method

Assuming Net Method were used

Date Accounts Title and Explanation Debit Credit Feb 1 2014 Merchandise Inventory 11100*(1-0.09) 10101 Accounts Payable 10101 Feb 4 2014 Accounts Payable 3400*(1-0.09) 3094 Merchandise Inventory 3094 Feb 13 2014 Accounts Payable (10101-3094) 7007 Cash 6797 Merchandise Inventory (10101-3094)*3% 210

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