Answer:
(a)
Under net method:
Purchase discount = Gross purchases × Purchase discount rate
= 22,000 × 2%
= $440
Net purchases = Gross purchases - Purchase discount
= $22,000 - $440
= $21,560
The journal entry under periodic inventory system is as follows:
OCT 12
Freight-in A/c Dr. $500
To cash $500
(To record freight-in charges)
OCT 31
Accounts payable A/c Dr. $21,560
Interest expense A/c Dr. $440
To cash $22,000
(To record payment made to suppliers)
OCT 16
Accounts receivable A/c Dr. $28,000
To sales revenue $28,000
(To record sales on account)
The journal entry under perpetual inventory system is as follows:
OCT 31
Merchandising Inventory (ending) A/c Dr. 19,060
Cost of goods sold A/c Dr. 18,000
To beginning inventory 15,000
To purchases 21,560
To freight-in 500
(To record cost of goods sold)
Oct 12
Merchandising Inventory Dr. $21,560
To Accounts payable $21,560
(To record purchase of inventory on account)
Merchandising Inventory Dr. $500
To cash $500
(To record purchase of inventory on account)
Year-end adjusting entry : No journal entry is required.
