Question

Tracy Company, a manufacturer of air conditioners, sold 170 units to Thomas Company on November 17, 2021. 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 perpetual inventory system.

Parts 1 and 2

Required:
1. Prepare the journal entries to record the (a) purchase by Thomas on November 17 and (b) payment on November 26, 2021. Thomas uses the gross method of accounting for purchase discounts.
2. Prepare the journal entry for the payment, assuming instead that it was made on December 15, 2021.

Part 3

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.

Answer 1

Answer
Journal entry
1
Date	account and explanation	Debit	Credit
Nov-17	Merchandise inventory (170*600*80%)	$     81,600
	Account payable		$     81,600
	(To record purchase)
Nov-26	Account payable	$     81,600
	Cash (81600*97%)		$     79,152
	Merchandise inventory		$       2,448
	(To record amount paid)
2
Date	account and explanation	Debit	Credit
Dec-15	Account payable	$     81,600
	Cash		$     81,600
	(To record amount paid)
3
Date	account and explanation	Debit	Credit
Nov-17	Merchandise inventory (170*600*80%*97%)	$     79,152
	Account payable		$     79,152
	(To record purchase)
Nov-26	Account payable	$     79,152
	Cash		$     79,152
	(To record amount paid)
Date	account and explanation	Debit	Credit
Dec-15	Account payable	$     79,152
	Merchandise inventory	$       2,448
	Cash (170*600*80% )		$     81,600
	(To record amount paid)