8) On May 1, Garcia Corporation bought $6,000 of merchandise from Morris Corporation, terms 2/10, n/30. Garcia paid the invoice on May 6. The journal entry to record the payment under the net approach method would be to:

A) debit Vouchers Payable $6,000; credit Cash $6,000.

B) debit Vouchers Payable $6,000; credit Discounts Lost $120; credit Cash $5,880.

C) debit Vouchers Payable $5,880; credit Cash $5,880.

D) debit Vouchers Payable $5,880; debit Discounts Lost $120; credit Cash $6,000.

 

9) A cash discount of $24 taken under the net method approach is recorded in:

A) the check register.

B) the voucher register.

C) the general journal.

D) None of these answers is correct.

10) The primary difference between the gross method and the net method of recording invoices is:

A) when the invoice is paid.

B) when the discount is recognized.

C) the gross method is only used when there are no discounts available.

D) the net method does not use a voucher system.

 

11) Brooke’s Company purchased $1,500 of merchandise with terms of 2/10, n/30 and paid the invoice within the discount period. If Brooke’s uses the net method of recording merchandise purchases, the $30 purchases discount is recorded in:

A) the voucher register.

B) the check register.

C) the general journal.

D) None of these answers are correct.

 

12) Carolyn Company purchased $4,500 of merchandise with terms of 4/10, n/60 and paid the invoice within the discount period. If Brooke’s uses the net method of recording merchandise purchases, the $180 purchases discount is:

A) recorded in the voucher register.

B) recorded in the check register.

C) recorded in the general journal.

D) not recorded unless the discount is lost after the discount date.

 

13) The entry to record payment of a voucher, for an invoice within the discount period, under the net method will include:

A) a debit to Purchase Discounts Lost.

B) a credit to Purchase Discounts.

C) a credit to Discounts Lost.

D) None of these are correct.

14) The entry to record payment of a voucher, for an invoice after the discount period, under the net method will include:

A) a debit to Purchase Discounts.

B) a credit to Purchase Discounts.

C) a debit to Discounts Lost.

D) None of these are correct.

 

15) The Discount Lost account is used when the gross method is used for recording invoices.

 

16) On June 2, Sandoval Corporation purchased $7,000 of merchandise from Johnston Company, terms 2/10, n/30 and prepared voucher #402. Sandoval returned $400 of the supplies on June 8, because of poor quality. Sandoval cancelled voucher #402 and replaced it with #415.

 

Required: Prepare journal entries to record the above transactions. Assume Sandoval uses the net approach method for recording purchases. Omit explanations.

17) Describe how the transactions listed would be handled applying the gross approach method and the net approach method. For example: A $750 invoice with a 3/10 net 30 discount.

 

Transaction             Gross Method        Net Method            

(a)Record original transaction

(b)Returned purchases

(c)Discounts taken

(d)Discounts not taken

 

 

 



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