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Homework answers / question archive / On December 3, Ainge Printing purchased Inventory listed at $7,400 from Craig Paper Supply

On December 3, Ainge Printing purchased Inventory listed at $7,400 from Craig Paper Supply

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On December 3, Ainge Printing purchased Inventory listed at $7,400 from Craig Paper Supply.

The terms of the purchase were 3/10, n/20.

Ainge Printing also purchased inventory from Tippetts Ink Wholesa!e, on December 10 for a list price of $10,300.

The terms of the purchase were 3/10, n/30.

On December 16, Ainge paid both suppliers for these purchases.

Ainge does not use a perpetual'. inventory system.

1. Give the entries to record the purchases and invoice payments assuming that;

(a) the net method is used and

(b) the gross method is used.

2. Assume that Ainge has not paid either of the Invoices on December 31.

Give the year-end adjusting entry, if the net method is used.

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Terms 3/10, n/20 means that a 3% discount can be availed if payment is made within 10 days, and the deadline for payment if discount is not availed is within 20 days.

1. (a) The entries to record the purchases and invoice payments using the net method is as follows:

 

Date Accounts Debit Credit
December 3 Purchases ($7,400 * (100% - 3%)) $7,178  
  Accounts payable   $7,178
       
December 10 Purchases ($10,300 * (100% - 3%)) $9,991  
  Accounts payable   $9,991
       
December 16 Purchase Discount Lost $222  
  Accounts Payable $7,178  
  Cash   $7,400
       
  Accounts payable $9,991  
  Cash   $9,991

1. (b) The entries to record the purchases and invoice payments using the gross method is as follows:

 

Date Accounts Debit Credit
December 3 Purchases $7,400  
  Accounts payable   $7,400
       
December 10 Purchases $10,300  
  Accounts payable   $10,300
       
December 16 Accounts Payable $7,400  
  Cash   $7,400
       
  Accounts payable $10,300  
  Purchase Discount   $309
  Cash   $9,991

2. Assuming that Ainge has not paid either of the Invoices on December 31, the year-end adjusting entry, if the net method is used is as follows:

 

Date Accounts Debit Credit
December 31 Purchase Discount Lost ($7,400 + $10,300) * 3% $531  
  Accounts Payable   $531