Question

2
Cash Purchase 10.000
To, 10% CD.
at
the
rate
60%​

Answer 1

Answer:

The purchase will be recorded at the amount AFTER the trade discount substracted at the net amount of 9,000 RS.  [10,000 x 10% = 1,000 (trade Discount)]

Periodic System                             

Entries:       Purchase   9,000 RS  (DR)                     

                        Accounts Payable   9,000 RS    (CR)

 

Perpetual System

Entries:       Inventory      9,000 RS  (DR)

                        Accounts Payable     9,000 RS   (CR)

 

2nd:  Cash Discount 2% paid 60% immediately

=>  Buyer is allowed to deduct 2% cash discount if the early payment of 60% paid immediately.

Periodic System

Entries:   Accounts Payable  (9,000 RS x 60%)   5,400  RS (DR)

                  Purchase Discount (5,400 RS x 2%)        108  RS   (CR)

                  Purchase (5,400 - 108)                       5,292  RS  (CR)

 

Perpetual System

Entries:   Accounts Payable  (9,000 RS x 60%)   5,400  RS (DR)

                  Cash Discount (5,400 RS x 2%)                 108  RS   (CR)

                  Inventories (5,400 - 108)                       5,292 RS  (CR)