On December 28, 2021, Videotech Corporation (VTC) purchased 15 units of a new satellite uplink system from Tristar Communications for $26,000 each. The terms of each sale were 1/10, n/30. VTC uses the net method to account for purchase discounts and a perpetual inventory system. VTC paid the net-of-discount amount on January 6, 2022. Prepare the necessary journal entries assuming that VTC uses the net method to account for purchase discounts.

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Business

India Townsend

12 November, 20:28

On December 28, 2021, Videotech Corporation (VTC) purchased 15 units of a new satellite uplink system from Tristar Communications for $26,000 each. The terms of each sale were 1/10, n/30. VTC uses the net method to account for purchase discounts and a perpetual inventory system. VTC paid the net-of-discount amount on January 6, 2022. Prepare the necessary journal entries assuming that VTC uses the net method to account for purchase discounts.

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Aaron Garrison · Answer 1

The adjusting entries are shown below:

1. Inventory A/c Dr $386,100

To Accounts payable $386,100

(Being the purchase of inventory is made on credit and discount basis)

2. Accounts payable $386,100

To Cash A/c $386,100

(Being the amount is paid for cash)

The computation of inventory after applying the discount is shown below:

= Number of units purchased * price of each satellite uplink system * (100 - discount rate)

= 15 units * $26,000 * (100 - 1%)

= $386,100