Question

Piere Imports uses the perpetual system in accounting for merchandise inventory and had the following transactions during the month of October.

Oct. 2 Purchased merchandise at a $4,700 price ($4,606 net), invoice dated October 2, terms 2/10, n/30.
10 Received a credit memorandum toward the return of $850 ($833 net) of merchandise that it purchased on October 2.
17 Purchased merchandise at a $8,800 price ($8,624 net), invoice dated October 17, terms 2/10, n/30.
27 Paid for the merchandise purchased on October 17, less the discount.
31 Paid for the merchandise purchased on October 2. (Payment was mistakenly delayed, which caused the discount to be lost.)

Required:
Prepare entries to record these transactions assuming that Piere Imports records invoices (a) at gross amounts and (b) at net amounts.

Answer 1

Entries and their narrations are posted below

Step-by-step explanation:

We will record assets and expenses on the debit as they increase during the year and will record liabilities and capital on the credit side as they increase during the year or vice versa.

October 2 Purchased merchandise at a $4,700 price ($4,606 net), invoice dated

GROSS NET

Dr Merchandise inventory $4,700 $4,606

Cr Account payable $4,700 $4,606

October 10 Received a credit memorandum toward the return of $850 ($833 net)

GROSS NET

Dr Account payable $850 $833

C Inventory $850 $833

October 17 Purchased merchandise at a $8,800 price ($8,624 net), invoice dated October 17,

GROSS NET

Dr Merchandise inventory $8,800 $8,624

Cr Account payable $8,800 $8,624

October 27 Paid for the merchandise purchased on October 17, less the discount.

Dr Account payable 8,800

Cr Discount 176

Cr Cash 8,624

October 31 Paid for the merchandise purchased on October 2.

Dr Account payable 4,700

Cr Cash 4,700