T pare general journal entries for these tr ansactions using the net-price metho
ID: 2565402 • Letter: T
Question
T pare general journal entries for these tr ansactions using the net-price method. SERIES B EXERCISE PURCHASES TRANSACTIONS-GROSS-PRICE AND NET-PRICE METHODS Gloria's Repair Shop had the following transactions during May: Purchased merchandise on account from Delgado's Supply for $900, terms 2/10, n/30. May 2 6 Purchased merchandise on account from Goro's Auto Care for $1,200, 11 Paid the amount due to Delgado's Supply for the purchase on May 2. 27 Paid the amount due to Goro's Auto Care for the purchase on May 6 terms 1/10, n/30. 1. Prepare general journal entries for these transactions using the gross-price method 2. Prepare general journal entries for these transactions using the net-price method.Explanation / Answer
Journal Entry
Date
Particulars
Dr. Amount (In $)
Cr. Amount (In $)
May 2
Purchase Merchandise
TO Delgado’s Supply (Accounts Payable)
900
900
May 6
Purchase Merchandise
TO Goro’s Auto Care (Accounts Payable)
1,200
1,200
May 11
Delgado’s Supply
TO Cash at Bank
TO Purchase Discount
900
882
18
May 27
Goro’s Auto Care
TO Cash
1,200
1,200
NOTE: 2/10, n/30 means that if the amount is paid within 10 days of invoice then the customer will receive 2% discount on purchases, otherwise whole amount is due within 30 days. In this case, Gloria repair shop has paid amount due within 9 days (May 11 – May 2) and therefore is eligible to receive purchase discount of ($900 x 2%)= $18.
Similarly, 1/10, n/30 means that if the amount is paid within 10 days of invoice then the customer will receive 1% discount on purchases, otherwise whole amount is due within 30 days. In this case, Gloria repair shop has paid amount due after 21 days and is therefore not eligible for discount and whole amount will have to be paid.
Journal Entry
Date
Particulars
Dr. Amount (In $)
Cr. Amount (In $)
May 2
Purchase Merchandise
TO Delgado’s Supply (Accounts Payable)
882
882
May 6
Purchase Merchandise
TO Goro’s Auto Care (Accounts Payable)
1,188
1,188
May 11
Delgado’s Supply
TO Cash at Bank
882
882
May 27
Goro’s Auto Care
Purchase Discount Lost
TO Cash
1,188
12
1,200
Date
Particulars
Dr. Amount (In $)
Cr. Amount (In $)
May 2
Purchase Merchandise
TO Delgado’s Supply (Accounts Payable)
900
900
May 6
Purchase Merchandise
TO Goro’s Auto Care (Accounts Payable)
1,200
1,200
May 11
Delgado’s Supply
TO Cash at Bank
TO Purchase Discount
900
882
18
May 27
Goro’s Auto Care
TO Cash
1,200
1,200
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