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Problem 10-5 Winter Company

The document contains journal entries and calculations for two companies regarding accounts receivable, cash discounts, and inventory. It shows the gross and net methods for calculating cost of sales and ending inventory for an autumn company.

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Elizabeth
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210 views2 pages

Problem 10-5 Winter Company

The document contains journal entries and calculations for two companies regarding accounts receivable, cash discounts, and inventory. It shows the gross and net methods for calculating cost of sales and ending inventory for an autumn company.

Uploaded by

Elizabeth
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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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

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