Question

In: Accounting

E8-8.   (Purchases Recorded, Gross Method) (LO 2) Cruise Industries purchased $10,800 of merchandise on February 1,...

E8-8.  

(Purchases Recorded, Gross Method)

(LO 2) Cruise Industries purchased $10,800 of merchandise on February 1, 2017, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $2,500 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13.

Instructions

(a)  Assuming that Cruise uses the perpetual method for recording merchandise transactions, record the               purchase, return, and payment using the gross method.

(b)  Assuming that Cruise uses the periodic method for recording merchandise transactions, record the           purchase, return, and payment using the gross method.

(c)  At what amount would the purchase on February 1 be recorded if the net method were used?

Solutions

Expert Solution

Answer :-

a)

Assuming that Cruise uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method

Date Account title and explanation Debit Credit
Feb.01 Inventory ($10,800-$1,080)          $9,720
Accounts Paybale          $9,720
Feb.04 Accouts payable ($2,500-250)          $2,250
Inventory          $2,250
Feb.13 Accounts payable          $7,470
Cash (5400-162) $ 7,246
Inventory ($7,470*3%) $ 224

b)

Assuming that Cruise uses the periodic method for recording merchandise transactions, record the purchase, return, and payment using the gross method

Date Account title and explanation Debit Credit
Feb.01 Purchase $9,720
Accounts Payable          $9,720
Feb.04 Accounts payable ($2,500-250          $2,250
Purchase return          $2,250
Feb.13 Accounts payable          $7,470
Cash (5400-162) $7,246
Cash discount (5400*3%)             $224

c)


The amount would be recorded using the net method:

Under net method, purchase on February 1 would be recorded after taking 3% discount into consideration.

Purchases uder net method on February 1 = $10,800 x 90% x 97% = $9,428.


Related Solutions

Kingbird Industries purchased $ 12,200 of merchandise on February 1, 2017, subject to a trade discount...
Kingbird Industries purchased $ 12,200 of merchandise on February 1, 2017, subject to a trade discount of  10% and with credit terms of  3/15, n/60. It returned $ 2,500 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13. (a) Partially correct answer iconYour answer is partially correct. Assuming that Kingbird uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method. (If no entry is required, select...
Pronghorn Industries purchased $11,700 of merchandise on February 1, 2017, subject to a trade discount of...
Pronghorn Industries purchased $11,700 of merchandise on February 1, 2017, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $3,000 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13. Assuming that Pronghorn uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method. (If no entry is required, select "No entry" for the account titles and enter 0...
E8–1A Bond Sale from Parent to Subsidiary (Straight-Line Method) LO 8–2 Assume the same facts as...
E8–1A Bond Sale from Parent to Subsidiary (Straight-Line Method) LO 8–2 Assume the same facts as in E8-1 and prepare entries using straight-line amortization of bond discount or premium. Pretzel Corporation owns 60 percent of Stick Corporation’s voting shares. On January 1, 20X2, Pretzel Corporation sold $150,000 par value, 6 percent first mortgage bonds to Stick for $156,000. The bonds mature in 10 years and pay interest semiannually on January 1 and July 1. Required Prepare the journal entries for...
Retail Method; Gross Profit Method Selected data on merchandise inventory, purchases, and sales for Celebrity Tan...
Retail Method; Gross Profit Method Selected data on merchandise inventory, purchases, and sales for Celebrity Tan and Ranchworks Co. are as follows: Cost Retail Celebrity Tan Merchandise inventory, August 1 $363,000 $472,000 Transactions during August: Purchases (net) 4,180,000 5,428,000 Sales 5,584,000 Ranchworks Co. Merchandise inventory, March 1 $221,000 Transactions during March through November: Purchases (net) 2,943,000 Sales 5,152,000 Estimated gross profit rate 42% Required: 1. Determine the estimated cost of the merchandise inventory of Celebrity Tan on August 28 by...
Retail Method; Gross Profit MethodSelected data on merchandise inventory, purchases, and sales forCelebrity Tan...
Retail Method; Gross Profit MethodSelected data on merchandise inventory, purchases, and sales for Celebrity Tan and Ranchworks Co. are as follows:CostRetailCelebrity TanMerchandise inventory, August 1$392,000$552,000Transactions during August:Purchases (net)4,507,0006,348,000Sales6,530,000Ranchworks Co.Merchandise inventory, March 1$239,000Transactions during March through November:Purchases (net)3,176,000Sales5,039,000Estimated gross profit rate36%Required:1. Determine the estimated cost of the merchandise inventory of Celebrity Tan on August 28 by the retail method, presenting details of the computations.Celebrity TanCost of the Merchandise InventoryAugust 31CostRetail$$$$Ratio of cost to retail price:%$$2a. Estimate the cost of the merchandise...
Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The following information...
Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The following information applies to the questions displayed below.] John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2019, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part-time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work on the side...
Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The following information...
Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The following information applies to the questions displayed below.] John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2019, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part-time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work on the side...
Required information Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The...
Required information Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The following information applies to the questions displayed below.] John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2019, John worked as a computer technician at a local university earning a salary of $153,100, and Sandy worked part-time as a receptionist for a law firm earning a salary of $30,100. John also does some Web design work on...
Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) Skip to question...
Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) Skip to question [The following information applies to the questions displayed below.] John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2020, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design...
Required information Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The...
Required information Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5) [The following information applies to the questions displayed below.] John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2018, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part-time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work on...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT