On August 1,Patron Company recorded purchases of inventory of $80,000 and $100,000 under credit terms of 2/15,net 30.The payment due on the $80,000 purchase was remitted on August 14.The payment due on the $100,000 purchase was remitted on August 29.Under the net method and the gross method,these purchases should be included at what respective net amounts in the determination of cost of goods available for sale? Net Method Gross Method

Question

Quizplus · Accepted Answer

Under the net method, purchases are recorded at the net amount after deducting any available discounts, while under the gross method, purchases are recorded at the gross amount without deducting any discounts.

Using the net method:
- $80,000 purchase: Payment was made within the discount period, so the net amount is $80,000 - ($80,000 x 2%) = $78,400
- $100,000 purchase: Payment was made after the discount period, so the net amount is $100,000

Total net purchases = $78,400 + $100,000 = $178,400

Using the gross method:
- $80,000 purchase: No discount was taken, so the gross amount is $80,000
- $100,000 purchase: No discount was taken, so the gross amount is $100,000

Total gross purchases = $80,000 + $100,000 = $180,000

Therefore, the best choice is C, which shows the net method net purchases of $178,400 and the gross method gross purchases of $180,000.

On August 1,Patron Company Recorded Purchases of Inventory of $80,000