Question

Tracy Company, a manufacturer of air conditioners, sold 250 units to Thomas Company on November 17, 2021. The units have a list price of $320 each, but Thomas was given a 30% trade discount. The terms of the sale were 3/10, n/30. Thomas uses a perpetual inventory system.

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.

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

Solution:

1)

Date	General Journal	Debit	Credi
Nov 17,2021	Inventory	$56,000
	Accounts payable ($320-30%)*224		$56,000
Nov 26 ,2021	Accounts payable	$56,000
	Cash		$54,320
	Inventory ($56,000*3%)		$1,680

2)

Date	Account title	Debit	Credit
Dec 15,2021	Accounts payable	$56,000
	Cash		$56,000

3)

Date	General Journal	Debit	Credi
Nov 17,2021	Inventory [(320-30%)*250]-3%	$54,320
	Accounts payable		$54,320
Nov 26 ,2021	Accounts payable	$54,320
	Cash		$54,320
Dec 15,2021	Accounts payable	$54,320
	Inventory($56,000*3%)	$1,680
	Cash		$56,000

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