Tracy Company, a manufacturer of air conditioners, sold 300 units to Thomas Company on November 17, 2021. The units have a list price of $275 each, but Thomas was given a 20% trade discount. The terms of the sale were 2/10, n/30. Thomas uses a perpetual i

1. (a) Purchase journal entry: Accounts Receivable $66,000 ($275 x 240 units) Sales Revenue $55,200 ($275 x 240 units x 80%) Sales Discount $10,800 ($275 x 240 units x 20%) Explanation: The Accounts Receivable account is debited for the full amount of $66,000 as Thomas has not yet paid for the purchase. The Sales Revenue account is credited for the discounted selling price of $55,200, which reflects the 20% trade discount given. The Sales Discount account is credited for the amount of the discount, which is $10,800. (b) Payment journal entry: Accounts Payable $64,680 ($66,000 - ($66,000 x 2%)) Cash $63,393.60 ($64,680 - ($64,680 x 2%)) Purchase Discounts $1,286.40 ($66,000 x 2%) Explanation: Thomas pays the invoice within 10 days, so they are entitled to a 2% discount. The Accounts Payable account is credited for the net amount due after the discount is taken, which is $64,680. The Cash account is debited for the amount paid, which is $63,393.60 ($64,680 - $1,286.40). The Purchase Discounts account is debited for the amount of the discount taken, which is $1,286.40. 2. Payment journal entry on December 15, 2021: Accounts Payable $66,000 Cash $64,680 ($66,000 - ($66,000 x 2%)) Purchase Discounts $1,320 ($66,000 x 2%) Explanation: Since Thomas did not pay within the discount period, they are not eligible for the 2% discount. The Accounts Payable account is credited for the full amount of $66,000. The Cash account is debited for the amount paid, which is $64,680. The Purchase Discounts account is debited for the amount of the discount that would have been taken if Thomas had paid within the discount period, which is $1,320.