Presented below are transactions related to Sheffield, Inc. May 10 Purchased goods billed at $13,500 subject to cash discount terms of 2/10, n/60. 11 Purchased goods billed at $14,000 subject to terms of 1/15, n/30. 19 Paid invoice of May 10. 24 Purchased goods billed at $10,500 subject to cash discount terms of 2/10, n/30.

a.) Prepare general journal entries for the transactions above under the assumption that purchases are to be recorded at net amounts after cash discounts and that discounts lost are to be treated as financial expense.

b.) Assuming no purchase or payment transactions other than those given above, prepare the adjusting entry required on May 31 if financial statements are to be prepared as of that date.

Question

Business

Campbell Graves

17 July, 03:45

Presented below are transactions related to Sheffield, Inc. May 10 Purchased goods billed at $13,500 subject to cash discount terms of 2/10, n/60. 11 Purchased goods billed at $14,000 subject to terms of 1/15, n/30. 19 Paid invoice of May 10. 24 Purchased goods billed at $10,500 subject to cash discount terms of 2/10, n/30.

a.) Prepare general journal entries for the transactions above under the assumption that purchases are to be recorded at net amounts after cash discounts and that discounts lost are to be treated as financial expense.

b.) Assuming no purchase or payment transactions other than those given above, prepare the adjusting entry required on May 31 if financial statements are to be prepared as of that date.

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Answers (1)

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Christine Collins · Answer 1

A)

May 10, goods purchased terms of 2/10, n/60:

Dr Merchandise inventory 13,230

Cr Accounts payable 13,230

May 11, goods purchased terms of 1/15, n/30:

Dr Merchandise inventory 13,860

Cr Accounts payable 13,860

May 19, May 10th invoice paid:

Dr Accounts payable 13,230

Cr Cash 13,230

May 24, goods purchased terms of 2/10, n/30:

Dr Merchandise inventory 10,290

Cr Accounts payable 10,290

B)

May 31, adjusting entry for lost discounts on May 11th purchase

Dr Purchase discounts lost 140

Cr Accounts payable 140

When you use the net method to account for purchase discounts, you record the purchase with the discount amount assuming that you will pay the invoice within the discount period.