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Castro Industries purchased $21,600 of merchandise on February 1, 2020, subject to a trade discount of 5% and with credit terms of 2/15, n/60. It returned $5,000 (gross price before trade or cash discount) on February 4. Castro paid one-­half of the outstanding obligation on February 13. The remaining amount was paid 60 days after the date of purchase.   Prepare the journal entries Castro would make for the purchase, the return, and the two payments using (1) the gross method and (2) the net method.

Castro Industries purchased $21,600 of merchandise on February 1, 2020, subject to a trade discount of 5% and with credit terms of 2/15, n/60. It returned $5,000 (gross price before trade or cash discount) on February 4. Castro paid one-­half of the outstanding obligation on February 13. The remaining amount was paid 60 days after the date of purchase.   Prepare the journal entries Castro would make for the purchase, the return, and the two payments using (1) the gross method and (2) the net method.

Principles of Accounting Volume 1
Principles of Accounting Volume 1
19th Edition
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax
Chapter12: Current Liabilities
Section: Chapter Questions
Problem 3PB: Review the following transactions, and prepare any necessary journal entries for Sewing Masters Inc....
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Castro Industries purchased $21,600 of merchandise on February 1, 2020, subject to a trade discount of 5% and with credit terms of 2/15, n/60. It returned $5,000 (gross price before trade or cash discount) on February 4. Castro paid one-­half of the outstanding obligation on February 13. The remaining amount was paid 60 days after the date of purchase.

 

Prepare the journal entries Castro would make for the purchase, the return, and the two payments using (1) the gross method and (2) the net method.

Castro uses a periodic inventory system.

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