Question

ABC Co. purchased merchandise on August 5 at a $1,000 invoice price with terms of 2/10, n/30 and paid for the merchandise on August 14. Determine its entry to record this purchase and the subsequent payment under both the gross method and the net method by matching the action on the left with the method on the right.

Answer 1

Credit Cash for $980 on August 14: Both methods

Debit Merchandise lnventoty for $980 on August 5: Net method

Credit Merchandise Inventory for $20 on August 14: Gross method

Debit Discounts Lost for $20 on August 14: Neither method

Step-by-step explanation:

Based on the information given the entry to record this purchase and the subsequent payment under BOTH THE GROSS METHOD and THE NET METHOD by matching the action on the left with the method on the right will be :

Credit Cash for $980 on August 14: BOTH METHODS

(100%-2%*$1,000)

Debit Merchandise lnventoty for $980 on August 5: NET METHOD

(100%-2%*$1,000)

Credit Merchandise Inventory for $20 on August 14: GROSS METHOD

(2%*$1,000)

Debit Discounts Lost for $20 on August 14: NEITHER METHOD

(2%*$1,000)