Exercise 8-11 Trade and purchase discounts; the gross method and the net method

Question

Exercise 8-11 Trade and purchase discounts; the gross method and the net method compared [LO8-3] Tracy Company, a manufacturer of air conditioners, sold 170 units to Thomas Company on November 17, 2016. The units have a list price of $600 each, but Thomas was given a 20% trade discount. The terms of the sale were 3/10, n/30. Thomas uses a periodic inventory system Required 1. Prepare the journal entries to record the purchase by Thomas on November 17 and payment on November 26, 2016, using the gross method of accounting for purchase discounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Answer is complete and correct Date General Journal Debit Credit November 17, 2016 Purchases 81,600 Accounts payable 81,600 November 26 2016 2 Accounts payable 81,600 2,448 79,152 Purchase discounts Cash 2. Prepare the journal entry to record the payment on December 15, 2016, using the gross method of accounting for purchase discounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Answer is complete and correct. Date General Journal Debit Credit December 15,Accounts payable 81,600 | 2016 Cash 81,600

Explanation / Answer

3) No Date General Journal Debit Credit 1 11/17/2016 purchases 79152 Accounts payable 79,152 2 11/26/2016 Accounts payable 79,152 cash 79,152 3 12/12/2016 Accounts payable 79,152 purchase discount lost 2,448 cash 81,600

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