Some of
the transactions of Torres Company during August are listed below. Torres uses
the periodic inventory method.
P8-3 (Purchases Recorded Gross and Net) Some of the transactions of Torres Company during
August are listed below. Torres uses the periodic inventory method.
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Aug 10
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Purchased merchandise on account, terms 2/10,
n/30
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$12,000
|
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Aug 13
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Returned part of the purchase of Aug 10, and
received credit on acct
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$1,200
|
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Aug 15
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Purchased merchandise on account, terms 1/10,
n/60
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$16,000
|
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Aug 25
|
Purchased merchandise on account, terms 2/10,
n/30
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$20,000
|
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Aug 28
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Paid invoice of August 15 in full.
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Instructions
(a) Assuming
that purchases are recorded at gross amounts and that discounts are to be
recorded when taken:
(1) Prepare
general journal entries to record the transactions.
(2) Describe
how the various items would be shown in the financial statements.
(b) Assuming
that purchases are recorded at net amounts and that discounts lost are treated
as finance expenses:
(1) Prepare
general journal entries to record the transactions.
(2) Prepare
the adjusting entry necessary on August 31 if financial statements are to be
prepared
at that time.
at that time.
(3) Describe
how the various items would be shown in the financial statements.
(c) Which of
the two methods do you prefer and why?
TUTORIAL
PREVIEW
(a) Assuming
that purchases are recorded at gross amounts and that discounts are to be
recorded when taken:
|
(1)
Prepare general journal entries to record the transactions.
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Aug 10
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Purchases
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12,000
|
|
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Accounts Payable
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12,000
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Aug 13
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Accounts Payable
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1,200
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Purchases Returns and Allowances
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1,200
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