Some of the transactions of Crane Company during August are listed below. Crane

Question

Some of the transactions of Crane Company during August are listed below. Crane uses the periodic inventory method.

1. Assuming that purchases are recorded at gross amounts and that discounts are to be recorded when taken:

Prepare general journal entries to record the transactions

2. Assuming that purchases are recorded at net amounts and that discounts lost are treated as financial expenses:

Prepare general journal entries to enter the transactions

3. Assuming that purchases are recorded at net amounts and that discounts lost are treated as financial expenses:

Prepare the adjusting entry necessary on August 31 if financial statements are to be prepared at that time

August 10 Purchased merchandise on account, $9,800, terms 2/10, n/30. 13 Returned part of the purchase of August 10, $1,000, and received credit on account. 15 Purchased merchandise on account, $13,800, terms 1/10, n/60. 25 Purchased merchandise on account, $18,300, terms 2/10, n/30. 28 Paid invoice of August 15 in full.

Explanation / Answer

Date Journal entries - Crane Company (Discounts is expensed) Dr. Cr. 10-Aug Purchase A/c…..DR. 9800 To Creditor. 9800 [being purchased made and discount availed on due date] 13-Aug Creditor A/c………………Dr. 1000 To Purchase return 1000 [Being part purchases returned ] 15-Aug Purchase A/c…..DR. 13800 To Creditor. 13800 [being purchased made and discount availed on due date] 25-Aug Purchase A/c…..DR. 18300 To Creditor. 18300 [being purchased made and discount availed on due date] 28-Aug Creditor A/c ……………………………Dr. 17934 Discount A/c……………………………Dr. 366 To cash 18300 [being payment made before due date and discount not availed ] 28-Aug Creditor A/c ……………………………Dr. 8624 Discount A/c……………………………Dr. 176 To cash 8800 [being payment made before due date and discount not availed ] 28-Aug Creditor A/c ……………………………Dr. 13662 Discount A/c……………………………Dr. 138 To cash 13800 [being payment made before due date and discount not availed ] Note :- we can also pass one consolidated entry on 28 for discount and payment made Date Journal entries - Crane Company (Discounts are availed ) Dr. Cr. 10-Aug Purchase A/c…..DR. 9800 To Creditor. 9800 [being purchased made and discount availed on due date] 13-Aug Creditor A/c………………Dr. 1000 To Purchase return 1000 [Being part purchases returned ] 15-Aug Purchase A/c…..DR. 13800 To Creditor. 13800 [being purchased made and discount availed on due date] 20-Aug Creditor A/c ……………………………Dr. 8800 To cash 8624 To discount 176 [being payment made in 10 days to avail the discount] 25-Aug Creditor A/c ……………………………Dr. 13800 To cash 13662 To discount 138 [being payment made in 10 days to avail the discount] 25-Aug Purchase A/c…..DR. 18300 To Creditor. 18300 [being purchased made and discount availed on due date] 28-Aug Creditor A/c ……………………………Dr. 18300 To cash 17934 To discount 366 [being payment made in 10 days to avail the discount]

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