POA@HGV_Grace_Chap 4_Journal Entries (with discounts)

Prepare journal entries in the books of Ain Trading for the following transaction.

Bought inventory at list price $1000 on credit from Siti Trading. There was 10% trade discount as Ain Trading was a regular customer.

• Dr Inventory $900

  Cr Trade payable: Siti Trading $900

• Dr Inventory $1000

  Cr Trade payable: Siti Trading $1000

• Dr Inventory $900

  Cr Trade payable: Ain Trading $900

Prepare journal entries in the books of Ain Trading for the following transaction.

Returned inventory previously bought on credit from Asyraf Trading. The list price of the inventory was $100 and there was 5% trade discount during purchase.

• Dr Trade payable: Asyraf Trading $95

  Cr Inventory $95

• Dr Inventory $95

  Cr Trade payable: Asyraf Trading $95

• Dr Trade payable: Asyraf Trading $100

  Cr Inventory $100

Prepare journal entries in the books of Ain Trading for the following transaction.

Paid credit supplier Sally $4200 by cheque in full settlement of amount owing of $4210.

• Dr Trade payable: Sally 4210

  Cr Cash at bank $4200

  Cr Discount received $10

• Dr Trade payable: Sally 4210

  Cr Cash at bank $4200

• Dr Trade payable: Sally 4200

  Cr Cash at bank $4200

Prepare journal entries in the books of Ain Trading for the following transaction.

Paid credit supplier John by cheque after 2% cash discount. Ain Trading owed John $1000

• Dr Trade payable: John $1000

  Cr Cash at bank $980

  Cr Discount received $20

• Dr Trade payable: John $1000

  Cr Cash at bank $1000

• Dr Cash at bank $980

  Dr Discount allowed $20

  Dr Trade receivable: John $1000

Prepare journal entries in the books of Ain Trading for the following transaction.

Sold inventory at list price $5000 to Xinyi on credit. These inventory cost $3000. Ain Trading gave Xinyi 10% trade discount as Xinyi purchased in bulk.

• Dr Trade receivable: Xinyi $4500

  Cr Sales revenue $4500

  Dr Cost of sales $3000

  Cr Inventory $3000

• Dr Trade receivable: Xinyi $5000

  Cr Sales revenue $5000

  Dr Cost of sales $3000

  Cr Inventory $3000

• Dr Trade receivable: Xinyi $4500

  Cr Sales revenue $4500

  Dr Cost of sales $2700

  Cr Inventory $2700

Prepare journal entries in the books of Ain Trading for the following transaction.

Sara returned inventory of list price $400. These inventory was earlier sold to Sara on credit and 10% trade discount was given. The cost price of these inventory was $200.

• Dr Sales returns $360

  Cr Trade receivable: Sara $360

  Dr Inventory $200

  Cr Cost of sales $200

• Cr Sales returns $360

  Dr Trade receivable: Sara $360

  Dr Inventory $180

  Cr Cost of sales $180

• Cr Sales returns $400

  Dr Trade receivable: Sara $400

  Dr Inventory $200

  Cr Cost of sales $200

Prepare journal entries in the books of Ain Trading for the following transaction.

Received cheque of $3995 from Mary in full settlement of amount owing of $4000. Ain Trading had earlier sold inventory to Mary on credit.

• Dr Cash at bank $3995

  Dr Discount allowed $5

  Cr Trade receivable: Mary $4000

• Dr Trade receivable: Mary $4000

  Cr Cash at bank $3995

  Cr Discount allowed $5

• Dr Trade payable: Mary $4000

  Cr Cash at bank $3995

  Cr Discount received $5

Prepare journal entries in the books of Ain Trading for the following transaction.

Received cheque from Jun Jie after 2% cash discount. Jun Jie owed Ain Trading $1000 as he had earlier bought inventory on credit.

• Dr Cash at bank $980

  Dr Discount allowed $20

  Cr Trade receivable: Jun Jie $1000

• Dr Trade receivable: Jun Jie $1000

  Cr Cash at bank $980

  Cr Discount allowed $20

• Dr Cash at bank $980

  Cr Trade receivable: Jun Jie $980

The amount of cash discount will be recorded as either 'Discount Allowed' or 'Discount Received'.

'Discount Allowed' is classified as ___ while 'Discount Received' is classified as ___.

• expense; income

• income; expense

• asset; income

The purpose of cash discount is ...

• To encourage credit customers to make early payment

• To encourage customers to buy in bulk