Valix Finacc vol 1 Problem 15-5

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 15-5

                Net method                                                                         Gross method

a. Within the discount period:                                     a. Within the discount period:

     1. Machinery                          490,000                              1. Machinery                          500,000

                Accounts payable                       490,000                     Accounts payable                         500,000

                (500,000 x 98%)

     2. Accounts payable          490,000                              2. Accounts payable          500,000

                Cash                                                 490,000                    Cash                                                       490,000

                                                                                                              Machinery                                                10,000

b. Beyond the discount period:                                    b. Beyond the discount period:

    1. Machinery                           490,000                              1. Machinery                         500,000

              Accounts payable                         490,000                      Accounts payable                          500,000

    2. Accounts payable           490,000                              2. Accounts payable        500,000

        Purchase discount lost       10,000                                 Purchase discount lost   10,000          

             Cash                                                    500,000                      Cash                                                    500,000

                                                                                                    Machinery                                           10,000