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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.
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.
Expert Solution
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 |
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