Ch. 8 FALL 2021: Purchases Recorded Gross and Net Some August transactions of Tommy Company are listed below. Tommy uses the periodic inventory method. Date Transaction Aug 10 Purchased merchandise on account, terms 2/10,n/30. 12,000 13 Returned part of the purchase of August 10, and received credit on account 1,200 15 Purchased merchandise on account, terms 1/10, n/60. 16,000 25 Purchased merchandise on account, terms 2/10,n/30. 20,000 28 Paid the remainder of the August 10 invoice in full. Instructions (Follow page of specific directions provided.) (a) Assuming that purchases are recorded at gross amounts. (1) Prepare general journal entries to record the transactions (2) Describe how the various items would be shown in the financial statements (1) Aug 10 Accounts Debit Credit 13 15 25 28 (2) 2) (b) (Follow page of specific directions provided.) Assuming that purchases are recorded at net amounts: (1) Prepare general journal entries to record the transactions (2) Prepare the adjusting entry necessary on August 31 if financial statements are to be prepared at that time. (3) Describe how the various items would be shown in the financial statements Accounts (1) Aug 10 Debit Credit 13 15 25 28 (2) 2) 31 (3) (c) Which of the two methods do you prefer and why