05.07.2022 - 15:40

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 Question: 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 inventory system.

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, using the gross method of accounting for purchase discounts.

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. Do you know the answer? Not sure about the answer? Find the right answer to the question 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 by subject Accounting, and if there is no answer or no one has given the right answer, then use the search and try to find the answer among similar questions.