Answer:
Purchase 12000 debit
Accounts Payable 12000 credit
--to record purchase--
Accounts Payable 1200 debit
Returns&Allowance 1200 credit
--to record returned goods--
Purchase 16000 debit
Accounts Payable 16000 credit
--to record purchase--
Purchase 20000 debit
Accounts Payable 20000 credit
--to record purchase--
Account Payable 16,000 debit
Purchase Discount 160 credit
Cash 15,840 credit
-to record payment within--
SECOND METHOD:
Purchase 11,760 debit
Accounts Payable 11,760 credit
--to record purchase--
Accounts Payable 1,176 debit
Returns&Allowance 1,176 credit
--to record returned goods--
Purchase 15,840 debit
Accounts Payable 15,840 credit
--to record purchase--
Purchase 19,600 debit
Accounts Payable 19,600 credit
--to record purchase--
Account Payable 16,000 debit
Cash 15,840 credit
-to record payment within--
interst expense 216 debit
account payable 216 credit
--to record interest incurred--
Explanation:
As we use periodic system we calculate the inventory and COGS at the end of the period so we use purchase and returns accounts rather than adjusting inventories in every transactions.
In the second method we use itnerest expense when the discount is loss.
<u><em>interest incurred for the period:</em></u>
(12,000 - 1,200) x 2% = 216
The secodn purchase at the end of the monthcan be paid within discount period therefore, we do not recognize interest expense yet.
