| Kitchen Electrics uses a perpetual inventory system. The following are three recent merchandising transactions: |
| Apr. 10 | Purchased 10 refrigerators from Polar Co. on account. Invoice price, $300 per unit, for a total of $3,000. The terms of purchase were 2/10, n/30. |
| Apr. 15 | Sold one of these refrigerators for $500 cash. |
| Apr. 20 | Paid the account payable to Polar Co. within the discount period. |
| (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.) | |
| a-1. | Prepare journal entries to record these transactions assuming that Kitchen Electrics records purchases of merchandise at net cost. |
a-2.
Prepare journal entries to record these transactions assuming that Kitchen Electrics records purchases of merchandise at gross invoice price.
b-1.
Assume that Kitchen Electrics did not pay Polar Co. within the discount period but instead paid the full invoice price on May 10. Prepare journal entries to record this payment assuming that the original liability had been recorded at net cost.
b-2.
Assume that Kitchen Electrics did not pay Polar Co. within the discount period but instead paid the full invoice price on May 10. Prepare journal entries to record this payment assuming that the original liability had been recorded at gross invoice price.
| repare journal entries to record these transactions assuming that Kitchen Electrics records purchases of merchandise at net cost. |
| Number | Particular | Debit $ | Credit $ |
| 1 | Inventry | 2940 | |
| To Accounts Payable(Polar Co) | 2940 | ||
| (To record purchases of 10 TVs at net cost ofper unit300 and less294 ($300, less 2%. |
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| 2 | Cash | 500 | |
| Sales | 500 | ||
| (Sold one of these refrigerators for $500 cash.) | |||
| 3 | Cost of Goods Sold | 294 | |
| Sells | 294 | ||
| (To record cost of Refrigratoes sold.) | |||
| 4 | Accounts Payable (Polar Co) | 2940 | |
| Cash | 2940 | ||
| (Paid account within discount period.) |
A-2
Prepare journal entries to record these transactions assuming that Kitchen Electrics records purchases of merchandise at gross invoice price.
| 1 | Inventry | 3000 | |
| To Accounts Payable(Polar Co) | 3000 | ||
| (ToTo record purchase of 10 Refrigratoes at gross invoice price $300 per unit) | |||
| 2 | Cash | 500 | |
| Sales | 500 | ||
| (Sold one of these refrigerators for $500 cash.) | |||
| 3 | Cost of Goods Sold | 300 | |
| Sells | 300 | ||
| (To record cost of TV sold.) | |||
| 4 | Accounts Payable (Polar Co) | 3000 | |
| Cash | 2940 | ||
| Purchase discount Taken | 60 | ||
| (Paid account within discount period.) |
b-1.
Assume that Kitchen Electrics did not pay Polar Co. within the discount period but instead paid the full invoice price on May 10. Prepare journal entries to record this payment assuming that the original liability had been recorded at net cost.
| 1 | Accounts Payable (Polar Co) | 2940 | ||
| Purchase Discounts Lost | 60 | |||
| Cash | 3000 | |||
| (Made payment after discount period had expired) |
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b-2.
Assume that Kitchen Electrics did not pay Polar Co. within the discount period but instead paid the full invoice price on May 10. Prepare journal entries to record this payment assuming that the original liability had been recorded at gross invoice price.
| 1 | Accounts Payable (Polar Co) | 3000 | |
| Cash | 3000 | ||
| (Made payment after discount period had expired) |
