Problem 10-6 (IAA)/ Autumn Company provided the following transactions for the current year, the first year of operations. 1. Purchase of merchandise at an invoice price of P4,750,000 excluding freight. Terms are 2/10; n /30. 2. Freight paid, P250,000. The freight is allocated to each purchase. 3. Cash payment on purchases, P3,717,000, of which P1,617,000 was paid within the discount period. 4. It is expected that all discounts on unpaid accounts payable will be lost. 5. On December 31, one fifth of the merchandise remains on hand. Required: a. Prepare journal entries to record the transactions using gross method and net method. b. Compute inventory and cost of sales under each method.

Problem 10-6 (IAA)/ Autumn Company provided the following transactions for the current year, the first year of operations. 1. Purchase of merchandise at an invoice price of P4,750,000 excluding freight. Terms are 2/10; n /30. 2. Freight paid, P250,000. The freight is allocated to each purchase. 3. Cash payment on purchases, P3,717,000, of which P1,617,000 was paid within the discount period. 4. It is expected that all discounts on unpaid accounts payable will be lost. 5. On December 31, one fifth of the merchandise remains on hand. Required: a. Prepare journal entries to record the transactions using gross method and net method. b. Compute inventory and cost of sales under each method.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter4: Accounting For Retail Operations

Section: Chapter Questions

Problem 4.1P: Purchase-related transactions The following selected transactions were completed by Epic Co. during...

See similar textbooks

Similar questions

Shaquille Corporation began the current year with inventory of 50,000. During the year, its purchases totaled 110,000. Shaquille paid freight charges of 8,500 for those purchases. At the end of the year, Shaquille had inventory of 47,800. Prepare a schedule to determine Shaquille's cost of goods sold for the current year.
Cost of goods sold and related items The following data were extracted from the accounting records of Harkins Company for the year ended April 30, 20Y8: Estimated returns of current year sales 11,600 Inventory, May 1, 20Y7 380,000 Inventory, April 30, 20Y8 415,000 Purchases 3,800,000 Purchases returns and allowances 150,000 Purchases discounts 80,000 Sales 5,850,000 Freight in 16,600 a. Prepare the Cost of goods sold section of the income statement for the year ended April 30, 20Y8, using the periodic inventory system. b. Determine the gross profit to be reported on the income statement for the year ended April 30, 20Y8. c. Would gross profit be different if the perpetual inventory system was used instead of the periodic inventory system?
Cost of merchandise sold and related items The following data were extracted from the accounting records of Harkins Company for the year ended April 30, 2019: Increase in estimated returns inventory 11,600 Merchandise inventory, May 1, 2018 380,000 Merchandise inventory, April 30, 2019 415,000 Purchases 3,800,000 Purchases returns and allowances 150,000 Purchases discounts 80,000 Sales 5,850,000 Freight in 16,600 a. Prepare the cost of merchandise sold section of the income statement for the year ended April 30, 2019, using the periodic inventory system. b. Determine the gross profit to be reported on the income statement for the year ended April 30, 2019. c. Would gross profit be different if the perpetual inventory system was used instead of the periodic inventory system?
Purchase-related transactions The following selected transactions were completed by Epic Co. during August of the curr ent year: Aug. 3. Purchased merchandise on account for $33400, terms FOB destination. 2/10. n/30. 9. Issued debit memorandum for $2500 ($2450 net of 2% discount) for merchandise from the August 3 purchase that was damaged in shipment. 10. Purchased merchandise on account, $25,000, terms FOB shipping point, n/com. Paid $600 cash to the freight company for delivery of the merchandise. 13. Paid for invoice of August 3, less debit memorandum of August 9 31. Paid for invoice of August 10. Instructions Illustrate the effects of each of the preceding transactions on the accounts and financial statements of Epic Co. Identify each transaction by date.