Question

Required information [The following information applies to the questions displayed below.] Tracy Company, a manufacturer of air conditioners, sold 260 units to Thomas Company on November 17, 2021. The units have a list price of $250 each, but Thomas was given a 20% trade discount. The terms of the sale were 2/10, n/30. Thomas uses a perpetual inventory system. Required: 1. Prepare the journal entries to record the (a) purchase by Thomas on November 17 and (b) payment on November 26, 2021. Thomas uses the gross method of accounting for purchase discounts. 2. Prepare the journal entry for the payment, assuming instead that it was made on December 15, 2021.

Answer 1

1) Journal entry

Date	account and explanation	Debit	Credit
Nov 17	Merchandise inventory (260*250*80%)	52000
	Account payable		52000
	(To record purchase)
Nov 26	Account payable	52000
	Cash (52000*98%)		50960
	Merchandise inventory		1040
	(To record amount paid)

b) Journal entry

Date	account and explanation	Debit	Credit
Dec 15	Account payable	52000
	Cash		52000
	(To record amount paid)