ACCT 201 Principles of Financial Accounting Practice Exam - Chapter 6 Reporting & Analyzing Cash and Internal Controls Dr. Fred Barbee Solution to Short-Problem #3

Short Problem #3

A company purchased merchandise inventory costing $15,000 with credit terms of 2/10, n/30. Eight days after the purchase, this company paid 1/3 of the amount due. The remaining balance was paid in 30 days.

Required:

1. Record the journal entries related to this transaction using the gross method or recording purchases.
2. Record the journal entries related to this transaction using the net method of recording purchases.

Solution - Part 1 - Gross Method:

Merchandise Inventory	15,000
Accounts Payable		15,000

Accounts Payable	5,000
Merchandise Inventory		100
Cash		4,900

Accounts Payable	10,000
Cash		10,000

Solution - Part 2 - Net Method:

Merchandise Inventory	14,700
Accounts Payable		14,700

Accounts Payable	4,900
Cash		4,900

Discounts Lost	200
Accounts Payable	9,800
Cash		10,000