Purchases Recorded Gross and Net some of the

transactions of
Purchases Recorded Gross and Net some of the transactions of Torres Company during August
are listed below. Torres uses the periodic inventory method.August 10 Purchased merchandise
on account, $12,000, terms 2/10, n/30.13 Returned part of the purchase of August 10, $1,200,
and received credit on account.15 Purchased merchandise on account, $16,000, terms 1/10,
n/60.25 Purchased merchandise on account, $20,000, terms 2/10, n/30.28 Paid invoice of
August 15 in full(a) Assuming that purchases are recorded at gross amounts and that discounts
are to be recorded when taken:(1) Prepare general journal entries to record the transactions.(2)
Describe how the various items would be shown in the financial statements.(b) Assuming that
purchases are recorded at net amounts and that discounts lost are treated as financial
expenses:(1) Prepare general journal entries to enter 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.(c) Which of the two
methods do you prefer and why?View Solution:
Purchases Recorded Gross and Net some of the transactions of
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