Exercise 8-14 B Record invoices at gross or net amounts Piere Imports uses the p

Question

Exercise 8-14B

Record invoices at gross or net amounts

Piere Imports uses the perpetual system in accounting for merchandise inventory and had the following transactions during the month of October. Prepare entries to record these transactions assuming that Piere Imports records invoices (a) at gross amounts and (b) at net amounts.

Oct.

  2

Purchased merchandise at a $3,000 price, invoice dated October 2, terms 2/10, n/30.

10

Received a $500 credit memorandum (at full invoice price) for the return of merchandise that it purchased on October 2.

17

Purchased merchandise at a $5,400 price, invoice dated October 17, terms 2/10, n/30.

27

Paid for the merchandise purchased on October 17, less the discount.

31

Paid for the merchandise purchased on October 2. Payment was delayed because the invoice was mistakenly filed for payment today. This error caused the discount to be lost.

Oct.

  2

Purchased merchandise at a $3,000 price, invoice dated October 2, terms 2/10, n/30.

10

Received a $500 credit memorandum (at full invoice price) for the return of merchandise that it purchased on October 2.

17

Purchased merchandise at a $5,400 price, invoice dated October 17, terms 2/10, n/30.

27

Paid for the merchandise purchased on October 17, less the discount.

31

Paid for the merchandise purchased on October 2. Payment was delayed because the invoice was mistakenly filed for payment today. This error caused the discount to be lost.

Explanation / Answer

INVOICE AMOUNT AT GROSS AMOUNT

DATE

ACCOUNT HEADINGS

DEBIT AMOUNT IN $

CREDIT AMOUNT IN $

October 2

Merchandise A/c

3000

      To Accounts Payable A/c

3000

(Being merchandise bought)

Oct. 10

Accounts Payable A/c

500

         To Merchandise A/c

500

(Being goods returned)

Oct. 17

Merchandise A/c

5400

      To Accounts Payable A/c

5400

(Being merchandise bought)

Oct. 27

Accounts Payable A/c

5400

         To Cash/Bank A/c

5292

         To Discount A/c

108

(Being cash paid for merchandise bought on Oct. 17)

Oct. 31

Accounts Payable A/c

2500

         To Cash/Bank A/c

2500

(Being cash paid for merchandise bought on Oct. 2 less returns made on Oct.10)

INVOICE AMOUNT AT NET AMOUNT

DATE

ACCOUNT HEADINGS

DEBIT AMOUNT IN $

CREDIT AMOUNT IN $

October 2

Merchandise A/c

2940

      To Accounts Payable A/c

2940

(Being merchandise bought recorded at amount after discount)

Oct. 10

Accounts Payable A/c

490

         To Merchandise A/c

490

(Being goods returned recorded at net amount)

Oct. 17

Merchandise A/c

5292

      To Accounts Payable A/c

5292

(Being merchandise bought recorded at amount after discount)

Oct. 27

Accounts Payable A/c

5292

         To Cash/Bank A/c

5292

(Being cash paid for merchandise bought on Oct. 17)

Oct. 31

Accounts Payable A/c

2450

Purchase A/c

50

         To Cash/Bank A/c

2500

(Being cash paid for merchandise bought on Oct. 2 less returns made on Oct.10. Since discount could not be availed for late payment, purchase amount increased to gross amount)

INVOICE AMOUNT AT GROSS AMOUNT

DATE

ACCOUNT HEADINGS

DEBIT AMOUNT IN $

CREDIT AMOUNT IN $

October 2

Merchandise A/c

3000

      To Accounts Payable A/c

3000

(Being merchandise bought)

Oct. 10

Accounts Payable A/c

500

         To Merchandise A/c

500

(Being goods returned)

Oct. 17

Merchandise A/c

5400

      To Accounts Payable A/c

5400

(Being merchandise bought)

Oct. 27

Accounts Payable A/c

5400

         To Cash/Bank A/c

5292

         To Discount A/c

108

(Being cash paid for merchandise bought on Oct. 17)

Oct. 31

Accounts Payable A/c

2500

         To Cash/Bank A/c

2500

(Being cash paid for merchandise bought on Oct. 2 less returns made on Oct.10)

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