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    This document compares two methods for recording accounts payable - the face amount method and net purchase method. Under the face amount method, purchases are debited for $100,000 and accounts payable is credited for $100,000. Accounts payable is later debited when paid. Under the net purchase method, purchases are debited for $98,000 and accounts payable is credited for $98,000, with a $1,000 debit to purchase discount lost and $1,000 credit to accounts payable for the discount. Both methods show accounts payable at $98,800 on the balance sheet after an accounts payable discount is taken.

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    WAA COURSE CAADI AH

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    Abdirahman assignment

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    This document compares two methods for recording accounts payable - the face amount method and net purchase method. Under the face amount method, purchases are debited for $100,000 and accounts payable is credited for $100,000. Accounts payable is later debited when paid. Under the net purchase method, purchases are debited for $98,000 and accounts payable is credited for $98,000, with a $1,000 debit to purchase discount lost and $1,000 credit to accounts payable for the discount. Both methods show accounts payable at $98,800 on the balance sheet after an accounts payable discount is taken.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    8 views1 page

    Abdirahman Assignment

    Uploaded by

    SKY Stationery
    This document compares two methods for recording accounts payable - the face amount method and net purchase method. Under the face amount method, purchases are debited for $100,000 and accounts payable is credited for $100,000. Accounts payable is later debited when paid. Under the net purchase method, purchases are debited for $98,000 and accounts payable is credited for $98,000, with a $1,000 debit to purchase discount lost and $1,000 credit to accounts payable for the discount. Both methods show accounts payable at $98,800 on the balance sheet after an accounts payable discount is taken.

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    © All Rights Reserved
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    of 1

     Part I Workout

    Thejournalentriesfortheyear of 2020andpresentationoftradeaccountspayableinthebalancesheetattheend
    of the yearunderthetwo alternative approachesarepresented below:
    Faceamountmethod Netpurchasemethod
    No Account Name DR CR Account Name DR CR
    i. Purchases 100,000 Purchases 98,000
    Trade A|P 100,000 Trade A|P 98,000
    ii. Trade A|P 50,000 Trade A|P 48,000
    Cash 49,000 PurchasediscountLost 1,000
    Purchasediscount 1,000 Cash 49,000
    iii. AFPD 1,200 PurchasediscountLost 200
    Purchasediscount 1,200 Trade A|P 200

    Presenting in the balance sheet at the end of the year:


    Trade A|P ……………………….…… 100,000 Trade A|P …………………... $98,800
    Less: AFPD …………………….……. (1,200)
    Carrying amount of Trade, A|P ……... $98,800

     Part II Define
    a) This a long-term Liability Because It’s More Than 1 Year
    b) And this is Current LiabilityBecause It’s Less Than 1 Year
    c)

     Part III Multiple Choose


    1) C

    2) D

    3) E

    4) D

    5) B

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