Answer:
Debit: Account payable $1,600
Credit: Cash: ($1,600 - $1,600*2%) $1,568
Credit: Discount received $32
Explanation:
Requirement 1:
I have recorded the journal entries for all of the dates, just to clear the whole picture.
On July 5:
When the purchase is made:
Debit Purchases $1,800
Credit Account payable $1,800
Since the purchase is on credit.
On July 7:
When $200 worth purchases were returned:
Debit: Account payable $200
Credit: Purchases return $200
On July 8:
When the payment was made:
Debit: Account payable $1,600
Credit: Cash: ($1,600 - $1,600*2%) $1,568
Credit: Discount received $32
Note:
Since, the payment is within the due terms, therefore, 2% discount is received upon payment on the account. $1,600 is account payable and 2% of $1,600 is $32
Requirement 2
What is the gross method to record purchases?
Answer:
Under gross method, purchases are recorded at gross amount. It cash is paid within the discount period, cash discount is recorded.
