On February 12th, Felton paid $175 freight charges to Blue Freight for merchandise purchased on...
Question:
On February 5th, Felton purchases $10,000 of merchandise from Becker; payment terms are 2/10, net 30. Prepare the journal entry to record the transaction using the periodic inventory system and the gross price method.
On February 12th, Felton paid $175 freight charges to Blue Freight for merchandise purchased on Feb. 5th. Prepare the journal entry to record the transaction using the periodic inventory system and the gross price method.
On February 22nd, Felton returned $400 of damaged merchandise to Becker, Inc.. Prepare the journal entry to record the transaction using the periodic inventory system and the gross price method.
On February 28th, Felton paid Becker, Inc the amount due. Prepare the journal entry to record the transaction using the periodic inventory system and the gross price method
Recording Transactions Under Periodic Inventory System and Gross Price Method
So, recording transactions under a periodic inventory system requires inventory purchases to be recorded in the purchases account instead of directly to the inventory general ledger account under the perpetual inventory system. Recording purchases under the gross price method is exactly that: recording each purchase for the gross amount shown on the suppliers invoice, and not recording any discount which may be taken until that discount is actually taken in the form a payment of the invoice Under the net price method, invoices are recorded assuming they will be paid net of the discount included as part of the terms of the invoice.
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Periodic Inventory System: Definition, Advantages & Examples
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Chapter 1 / Lesson 14
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Explore the periodic inventory system. Learn the definition of the periodic inventory system and understand its advantages. See periodic inventory system examples.
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