Question

Piere Imports uses the perpetual system in accounting for merchandise inventory and had the following transactionsduring the month of October. Prepare entries to record these transactions assuming that Piere Imports records invoices (a)at gross amounts and (b) at net amounts.Oct 2 Purchased merchandise at a $3,000 price, invoice dated October 2, terms 2/10, n/ 30.10 Received a $500 credit memorandum (at full invoice price) for the return of merchandise that it purchased on October217 Purchased merchandise at a $5,400 price, invoice dated October 16, terms 2/10, n/30.26 Paid for the merchandise purchased on October 17, less the discount31 Paid for the merchandise purchased on October 2 Payment was delayed because the invoice was mistakenly filed forpayment today. This error caused the discount to be lost

Answer 1

Answer:

If records invoices at gross amounts

October 2th

inventory    3,000 debit

    A/P                    3,000 credit

October 2nd

A/P              500 debit

      inventory           500 credit

October 17th

inventory       5,400 debit

      A/P                    5,400 credit

October 26th

A/P                5,400 debit

           Inventory          108 credit

           cash               5,292 credit

October 31th

A/P             2,500 debit

      Cash                 2,500 credit

If records invoices at nets amounts

October 2th

inventory    2,940 debit

    A/P                    2,940 credit

October 2nd

A/P              490 debit

      inventory           490 credit

October 17th

inventory       5,292 debit

      A/P                    5,292 credit

October 26th

A/P                5,292 debit

           cash               5,292 credit

October 31th

A/P             2,490 debit

Inventory         10 debit

      Cash                 2,500 credit

Explanation:

gross amount: we use the invoice nominal

net amount: we use the net nominal

October 2nd net:

3,000 x (1-2%) = 2,940

returns net: 500 x ( 1 - 2%) = 490

October 16th invoice net:

5,400 x ( 1 - 2%) = 5,292

october 31th

october 2th invoice balance:

2,940 - 490 = 2,450