Question

In: Accounting

Tracy Company, a manufacturer of air conditioners, sold 110 units to Thomas Company on November 17, 2021. The units have...

Tracy Company, a manufacturer of air conditioners, sold 110 units to Thomas Company on November 17, 2021. The units have a list price of $400 each, but Thomas was given a 20% trade discount. The terms of the sale were 3/10, n/30. Thomas uses a perpetual inventory system.

3. Prepare the journal entries to record the purchase by Thomas on November 17 and payment on November 26, 2021 and December 15, 2021 using the net method of accounting for purchase discounts.

Solutions

Expert Solution

WORKING NOTES:
CALCULATION OF NET VALUE OF PURCHASE OF AIR CONDITTIONES
List price = $                    400.00
Less: 20% Trade discount $                       80.00
Net purhcase Price $                    320.00
No. of units Purchase                               110
Purchase Price $              35,200.00
Less:Purchase discount 3% $                 1,056.00
Net Pruchase price $              34,144.00
SOLUTION :
Journal Entries
Sr. No. Date Account Title and explanation Debit Credit
1 Nov 17 , 2021 Purchase $34,144
          Accont Payable $34,144
If Paid as on Nov 26, 2021
Nov 26, 2021 Account Payable $34,144
2        Cash $34,144
If Paid as on Dec 15, 2021
3 Account Payable $34,144
Loss on purchase discount $1,056
         Cash $35,200

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