Prepare journal entries to record each of the following tran

Prepare journal entries to record each of the following transactions. The company records purchases using the gross method and a perpetual inventory system Aug. 1 Purchased merchandise with an invoice price of $60,000 and credit terms of 3/10, n/30. os 4-6 Recording purchases and 11 Paid supplier the amount owed from the August 1 purchase. P1

Solution

Journal entries to record purchase under gross method. Date Account Title Debit Credit Aug.1 Merchandise inventory 60000 Accounts Payable 60000 (To record purchase of merchandise inventory on acount) Aug.11 Accounts Payable 60000 Discount on purchases 1800 Cash 68200 (To record the payment for purchase made on Aug.1) Since the payment is within the credit period allowed, a discount of 3% on $60,000 is accounted on the payment date.