Mary’s TV uses a perpetual inventory system. The following are three recent merchandising trans-actions: Mar. 6 Purchased eight TVs from Whosa Industries on account. Invoice price, $350 per unit,for a total of $2,800. The terms of purchase were 2/10, n/30.Mar. 11 Sold two of these televisions for $600 cash.Mar. 16 Paid the account payable to Whosa Industries within the discount period.Instructionsa. Prepare journal entries to record these transactions assuming that Mary’s records purchases ofmerchandise at:1. Net cost2. Gross invoice priceb. Assume that Mary’s did not pay Whosa Industries within the discount period but instead paidthe full invoice price on April 6. Prepare journal entries to record this payment assuming thatthe original liability had been recorded at:1. Net cost2. Gross invoice pricec. Assume that you are evaluating the efficiency of Mary’s bill-paying procedures. Which accounting method—net cost or gross invoice price—provides you with the most useful infor-mation? Explain.
Mary’s TV uses a perpetual inventory system. The following are three recent merchandising trans-
actions:
Mar. 6 Purchased eight TVs from Whosa Industries on account. Invoice price, $350 per unit,
for a total of $2,800. The terms of purchase were 2/10, n/30.
Mar. 11 Sold two of these televisions for $600 cash.
Mar. 16 Paid the account payable to Whosa Industries within the discount period.
Instructions
a. Prepare
merchandise at:
1. Net cost
2. Gross invoice price
b. Assume that Mary’s did not pay Whosa Industries within the discount period but instead paid
the full invoice price on April 6. Prepare journal entries to record this payment assuming that
the original liability had been recorded at:
1. Net cost
2. Gross invoice price
c. Assume that you are evaluating the efficiency of Mary’s bill-paying procedures. Which
accounting method—net cost or gross invoice price—provides you with the most useful infor-
mation? Explain.
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