PROBLEM 10-5 WINTER COMPANY

Company A:
Invoice amount: Accounts Receivable (500k x 80% x 90% x 90%) 324,000

Amount to be paid within discount period:

Accounts Receivable 324,000
Cash discount (324k x 2%) (6,480)
Total 317,520

Company B:
Invoice amount: Accounts Receivable (500k x 65%) 325,000

Amount to be paid within the discount period:

Accounts Receivable 325,000
Cash discount (325k x 2%) (6,500)
Total 318,500

PROBLEM 10-6 AUTUMN COMPANY

a. Journal Entries
Gross Method:
1. Purchases 4,750,000
Accounts Payable 4,750,000
2. Freight in 250,000
Cash 250,000
3. Accounts Payable (2.1M + 1.65M) 3,750,000
Cash (2.1M + 1.617M) 3,717,000
Purchase discount (1.617M/98% x 2%) 33,000
4. No Journal Entry
5. Merchandise Inventory-end 943,400
Income Summary (4,717,000 / 5) 943,400

Net Method:
1. Purchases 4,655,000
Accounts Payable 4,655,000
2. Freight in 250,000
Cash 250,000
3. Accounts Payable 3,675,000
Purchase discount lost (2.1M x 2%) 42,000
Cash 3,717,000
4. Purchase discount lost (980k x 2%) 19,600
Accounts Payable 19,600
5. Merchandise Inventory-end 931,000
Income Summary (4,655,000 / 5) 931,000
b. Gross method:
Inventory-end 943,400

Cost of Sales:
Purchases 4,750,000
Freight in 250,000
Purchase discount (33,000)
Ending Inventory (943,400)
Cost of Sales 4,023,600

Net method:
Inventory-end 943,400

Cost of Sales:
Purchases 4,655,000
Freight in 250,000
Ending Inventory (931,000)
Cost of Sales 3,974,000