Valix Finacc vol 1 Problem 7-16

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 7-16

Gross method                                                     

Sept.  1   Purchases                                                                        650,000

                       Accounts payable                                                                              650,000

          1   Freight in                                                                           20,000

                       Accounts payable                                                                                20,000

7   Accounts payable                                                             10,000

             Purchase returns and allowances                                                         10,000

Oct.  1   Accounts payable                                                           660,000

                       Cash                                                                                                   660,000

Net method

Sept.  1   Purchases                                                                        637,000

                      Accounts payable                                                                               637,000

          1   Freight in                                                                           20,000

                       Accounts payable                                                                                20,000

7   Accounts payable (10,000 x 98%)                                        9,800

             Purchase returns and allowances                                                           9,800

Oct.  1   Accounts payable (657,000 – 9,800)                                 647,200

               Purchase discount lost (2% x 640,000)                               12,800

                       Cash                                                                                                     660,000