Purchase Solution

Purchases recorded gross and net

Not what you're looking for?

Ask Custom Question

Some of the transactions of Torres Company during August are listed below. Torres uses the periodic inventory method.

August 10 Purchased merchandise on account,$12,000, terms 2/10, n/30.
13 Returned part of the purchase of August 10, $1,200, and received credit on account.
15 Purchased merchandise on account, $16,000, terms 1/10, n/60.
25 Purchased merchandise on account, $20,000, terms 2/10, n/30.
28 Paid invoice of August 15 in full.

Instructions

a. Assuming that purchases are recorded at gross amounts and that discounts are to be recorded when taken:
1. Prepare general journal entries to record the transaction.
2. Describe how the various items would be shown in the financial statements.
b. Assuming that purchases are recorded at net amounts and that discounts lost are treated as financial expenses:
1. Prepare general journal entries to enter the transactions.
2. Prepare the adjusting entry necessary on August 31 if financial statements are to be prepared at that time.
3. Describe how the various items would be shown in the financial statements.
c. Which of the two methods to you prefer and why?

Purchase this Solution
Solution Summary

The solution explains the journal entries for purchases recorded gross and net

Purchase this Solution
Free BrainMass Quizzes
Motivation

This tests some key elements of major motivation theories.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Basics of corporate finance

These questions will test you on your knowledge of finance.

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

View More Free Quizzes
Related BrainMass Solutions

  • Inventory Calculations

    The net effect on COGS is $210,000 overstatement. 6. Gross Profit FYE 12/31/05 - Gross profit is Sales - COGS. Sales are undertstaed by 430,000 and COGS is overstated by 210,000. The net effect is gross profit is undertstated by $640,000.

  • Gross Method of Recording Inventory

    for sale when the inventory is recorded using the gross method under perpetual system.

  • Periodic inventory and income statements

    Net Sales Beginning Inventory Net Purchases Ending Inventory Cost of Gross Profit Expenses Net Income or (Loss) Goods Sold 240,000 76,000 104,000 35,200 ?

  • Cost of goods sold , periodic, FIFO,gross profit method

    The following data is available: Net sales, first month $13,000 Normal gross profit 45% Beginning inventory 8,000 Net purchases 7,000 Using the gross profit method, the Estimated ending inventory balance would be: $15,000

  • Les Fleurs: Financial Calculations

    of goods sold and gross profit for Les Fleurs boutique.

  • Calculate the average accounts payable for APP Corporation

    459025 Calculate the average accounts payable for APP Corporation A chain of appliance stores, APP Corporation, purchases inventory with a net price of $500,000 each day. The company purchases the inventory under the credit terms of 2/15, net 40.

  • Total Amount of Cash Paid for Its Inventory Purchases

    Net income was $18,000, which included sales of $300,000 and gross profit of $100,000 ? Bing's closest competitor had sales of $450,000 and net income of $18,000. It collected $414,000 in cash from its customers ?

  • Accounting MCQ: inventory, equipment cost, R&D, liabilities.

    271086 Accounting MCQ: inventory, equipment cost, R&D, liabilities. gross profit method Gomez Company had a gross profit of $360,000, total purchases of $420,000, and an ending inventory of $240,000 in its first year of operations as a retailer.

  • Difference between a seller and buyer in accounting terms

    Since the payable was originally recorded at the net amount, the entry for payment will require a debit to account payable for the net amount and a credit to cash for the gross price paid; the difference will be debited to a Discounts Lost account.

View More Related Solutions