Question

1. Lakeside Restaurant purchased inventory from Valley Packing, receiving an invoice dated February 3, 20X4, for $2,000 with terms 3/10, n/30. Using the NET method of recording purchases, complete the following: When recording the purchase of the inventory on Feb 3, the amount of the inventory is:

Inventory $?

      Accounts Payable

2. Lakeside Restaurant purchased inventory from Valley Packing, receiving an invoice dated February 3, 20X4, for $2,000 with terms 3/10, n/30. Using the NET method of recording purchases, complete the following: When recording the payment of the invoice within the discount period, the amount of the Accounts Payable is:

Accounts Payable $?

      Cash

3. Lakeside Restaurant purchased inventory from Valley Packing, receiving an invoice dated February 3, 20X4, for $2,000 with terms 3/10, n/30. Using the NET method of recording purchases, complete the following: When recording the payment of the invoice after the discount period, the amount of Discounts Lost is:

Accounts Payable

Discounts Lost $?

      Cash

Answer 1

1	Amount of Inventory under net method	$           1,940	$2000*(1-0.03)
	or $2000- ($2000*3%)
	The entry would be:
		Debit	Credit
	Inventory	$           1,940
	Accounts Payable		$         1,940

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2	When recording the payment of the invoice within the discount period, the amount of the Accounts Payable is $1400

-

The entry would be:
	Debit	Credit
Accounts Payable	$           1,940
Cash		$         1,940

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3	When recording the payment of the invoice after the discount period, the amount of Discounts Lost is: $60

-

Discount loss =	$                 60	($2000*3%)
The entry would be:
	Debit	Credit
Accounts Payable	$           1,940
Discounts Lost	$                 60
Cash		$         2,000

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