E8-8 (Purchases Recorded, Gross Method)

Ohno Industries purchased 12,000 of merchandise on February 1, 2015, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned 3,000 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13. (All amounts in thousands.)

Instructions

(a) Assuming that Ohno uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method.

(b) Assuming that Ohno uses the periodic method for recording merchandise transactions, record the purchase, return, and payment using the gross method.

(c) At what amount would the purchase on February 1 be recorded if the net method were used?

E8-9 (Periodic versus Perpetual Entries) Chippewas Company sells one product. Presented below is information for January for Chippewas Company.

Jan. 1 Inventory 100 units at $6 each

4 Sale 80 units at $8 each

11 Purchase 150 units at $6.50 each

13 Sale 120 units at $8.75 each

20 Purchase 160 units at $7 each

27 Sale 100 units at $9 each

Chippewas uses the FIFO cost flow assumption. All purchases and sales are on account.

Instructions

(a) Assume Chippewas uses a periodic system. Prepare a all necessary journal entries, including the end-of-month closing entry, to record cost of goods sold. A physical count indicates that the ending inventory for January is 110 units.

(b) Compute gross profit using the periodic system.

(c) Assume Chippewas uses a perpetual system. Prepare a all necessary journal entries.

(d) Compute gross profit using the perpetual system.