Question
BSI purchases its inventory from various vendors on trade terms. Most suppliers offer BSI 30-day terms; however, one supplier offers BSI credit terms of 2/10,
BSI purchases its inventory from various vendors on trade terms. Most suppliers offer BSI 30-day terms; however, one supplier offers BSI credit terms of 2/10, net 30. BSI made two purchases from this supplier during 20X7:
- On April 20, BSI purchased $20,000 of inventory. The invoice was paid on April 29.
- On October 18, BSI purchased $30,000 of inventory. The invoice was paid on October 31.
- BSI uses the net method to value its inventory when discounts for early payment are offered by suppliers.
Prepare the journal entries to record the two inventory purchases detailed above, together with payment of the related invoices.
****I unlocked this question on course hero already and the answer provided was:
April 20
Dr. Puchases 20000
Cr. vendors 20000
April 29
Dr. Vendors 20000
Cr bank 19600
Cr Cash discount 400
Oct 18
Dr. Purchases 30000
Cr Vendors 30000
Oct 31
Dr. Vendors 30000
Cr bank 30000
My question is, isn't this the gross method and not the net method? Also is the initial entry (on the days of purchase) necessary of should i only be making journal entries for the dates the invoice was paid?
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