Concord Industries purchased $9,100 of merchandise on February 1, 2020, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $2,900 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13.Assuming that Cruise uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method.

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andromache andromache · Answer 1 · 2019-11-06T08:21:17+01:00

Answer:

Explanation:

The journal entries are shown below:

a. Merchandise Inventory A/c $8,190

To Accounts payable A/c $8,190

(Being goods purchased on credit)

The computation after applying discount is shown below:

= Purchase amount - purchase amount × trade discount percentage

= $9,100 - $9,100 × 10%

= $9,100 - $910

= $8,190

b. Accounts payable A/c $2,610

To Merchandise Inventory A/c $2,610

(Being goods returned is recorded)

The computation after applying discount is shown below:

= Purchase amount - purchase amount × trade discount percentage

= $2,900 - $2,900 × 10%

= $2,900 - $290

= $2,610

c. Accounts payable A/c Dr $5,580 ($8,190 - $2,610)

To Cash A/c $5,412.60

To Merchandise Inventory A/c $167.40 ($8,190 - $2,610) × 3%

(Being due amount is paid and remaining balance is credited to the cash account)