Question

On December 28, 2021, Videotech Corporation (VTC) purchased 15 units of a new satellite uplink system from Tristar Communications for $26,000 each. The terms of each sale were 1/10, n/30. VTC uses the gross method to account for purchase discounts and a perpetual inventory system. VTC paid the net-of-discount amount on January 6, 2022. Prepare the journal entries on December 28 and January 6 to record the purchase and paymen

Answer 1

December 28, 2021

Merchandise $26,000 (debit)

Trade Payable $26,000 (credit)

January 6, 2022

Trade Payable $260 (debit)

Discount Received $260 (credit)

Being recognition of discount received

Trade Payable $25,740 (credit)

Cash $25,740 (credit)

Being settlement of an account

Step-by-step explanation:

December 28, 2021

Recognise Liability and an Asset

January 6, 2022

Recognise Cash and an Income and also de-recognise a Liability

Answer 2

December 28, 2021 Entry:

DR: Satellite uplink systems($26,000*15) $390,000

CR: Accounts Payable(Tristar Communication) $390,000

(To record purchase of Satellite uplink systems from Tristar Communication on credit)

Entry on January 6, 2022:

DR: Accounts Payable(Tristar Communication) $ 390,000

Cr: Cash Discount (390,000×1%) $3,900

Cr: Cash/Bank $ 386,100

Step-by-step explanation:

On Dec 28, 2021 as the units were purchased on credit so a liability is recognized against the purchase of assets.

On Jan 6, 2022 there has been a cash discount received of 1% of invoice value if payment has been made with 10 days of invoice. As the payment has been made with in 10 days so a cash discount is received which is categorized as an income for the business.