Hirsch Company buys inventory for $30,000 on terms of 1/10, n/30. It pays within the discount period.

Required:

1.

Prepare the journal entries to record the purchase and the payment under both the (a) gross price and (b) net price methods. Assume that Hirsch uses a periodic inventory system.

2.

Prepare the journal entries to record the purchase and payment under both the (a) gross price and the (b) net price methods. Assume that Hirsch uses a perpetual inventory systemCHART OF ACCOUNTSHirsch CompanyGeneral Ledger

	ASSETS
111	Cash
121	Accounts Receivable
131	Inventory
142	Prepaid Insurance
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
224	Interest Payable
231	Salaries Payable
241	Accrued Loss on Purchase Commitment

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

EXPENSES

500

Cost of Goods Sold

510

Purchases

511

Purchase Returns and Allowances

512

Purchase Discounts Taken

513

Purchase Discounts Lost

514

Loss on Purchase Commitment

515

Recovery of Accrued Loss on Purchase Commitment

521

Salaries Expense

525

Interest Expense

532

Bad debt Expense

534

Insurance Expense

536

Utilities Expense

539

Miscellaneous Prepare the journal entries to record the purchase on March 14 and the payment on March 22 under the gross price method assuming a periodic inventory system. Additional Instruction

PAGE 3

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5

Prepare the journal entries to record the purchase on March 14 and the payment on March 22 under the net price method assuming a periodic inventory system. Additional Instruction

PAGE 3

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4

Prepare the journal entries to record the purchase on March 14 and the payment on March 22 under the gross price method assuming a perpetual inventory system. Additional Instruction

PAGE 3

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5

Prepare the journal entries to record the purchase on March 14 and the payment on March 22 under the net price method assuming a perpetual inventory system. Additional Instruction

PAGE 3

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4