Question

Problem 8-3

Some of the transactions of Buffalo Company during August are listed below. Buffalo uses the periodic inventory method.

August 10 Purchased merchandise on account, $13,600, terms 2/10, n/30.

13 Returned part of the purchase of August 10, $1,200, and received credit on account.

15 Purchased merchandise on account, $16,800, terms 1/10, n/60.

25 Purchased merchandise on account, $21,600, terms 2/10, n/30.

28 Paid invoice of August 15 in full.

Assuming that purchases are recorded at gross amounts and that discounts are to be recorded when taken:

Prepare general journal entries to record the transactions.

Date Account Titles and Explanation Debit Credit

Assuming that purchases are recorded at net amounts and that discounts lost are treated as financial expenses: Prepare general journal entries to enter the transactions.

Date Account Titles and Explanation Debit Credit

Aug. 28

Assuming that purchases are recorded at net amounts and that discounts lost are treated as financial expenses: Prepare the adjusting entry necessary on August 31 if financial statements are to be prepared at that time.

Date Account Titles and Explanation Debit Credit

Aug. 31

Answer 1

a.

Date	Accounts title	Dr	Cr
August 10	Purchase	$13,600
	To Accounts payable		$13,600
13	Accounts payable	$1,200
	To purhcase return and allowance		$1,200
15	Purchase	$16,800
	To Accounts payable		$16,800
25	Purchase	21,600
	To Accounts payable		21,600
28	Accounts payable	$16,800
	To cash		16632
	To purchase discount		168

b.

Date	Accounts title	Dr	Cr
August 10	Purchase [13600 * 98%]	13328
	To Accounts payable		13328
13	Accounts payable [1200*98%]	1176
	To purhcase return and allowance		1176
15	Purchase [16800*99%]	16632
	To Accounts payable		16632
25	Purchase [21,600 * 98%]	21168
	To Accounts payable		21168
28	Accounts payable	16632
	purchase discount lost[16800*1%]	168
	To cash		16800

c

Date	Accounts title	Dr	Cr
August 31	purchase discount lost [(13600-1200) * 2%]	248
	To Accounts payable		248