The boxes can be selected to say: Accounts payable accounts receivable cash cost

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The boxes can be selected to say: Accounts payable

accounts receivable

cash

cost of goods sold

inventory

notes payable

sales revenue

Suppose Cool Wave purchases $48,000 of sportswear on account from Great Wear, Inc., on May 1, 2018. Credit terms are 1/10, net 60. Cool Wave pays Great Wear, Inc., on May 8, 2018 1. Journalize the transactions for Cool Wave on May 1, 2018, and May 8, 2018, assuming the "net" method is used 2. What was the final cost of this inventory for Cool Wave? 1. Journalize the transactions for Cool Wave on May 1, 2018, and May 8, 2018, assuming the "net" method is used (Record debits first, then credits. Exclude explanations from any journal entries.) May 1: Purchases $48,000 of sportswear on account. Journal Entry Date Accounts Debit Credit May 1 May 8: Paid Great Wear, Inc.. Journal Entry Date Accounts Debit Credit May 8 2. What was the final cost of this inventory for Cool Wave? The final cost of the inventory for Cool Wave was S hoose from any list or enter any number in the input fields and then continue to the next question.

Explanation / Answer

1. Journal Entries

Credit terms 1/10, net 60 means the following:

Net Method of accounting the purchases:

Under the net method, a buyer (Cool wave) records purchases at the invoice amount net of discount.

In this case, Invocie amount for the purchases on May 1= $48,000

Discount @1% if cool wave pay within 10 days = $48,000 x 1% = $480

Invoice amount, net of discount = $48,000 - $480 = $47,520

Journal entry to record the purchase on May 1

Journal entry to record the payement for the purchase:

2. Final Cost of the inventory

Final cost of the inventory = Invoice amount - Discount = $48,000 - $480 = $47,520

Date Accounts Debit Credit May 1 Inventory $47,520 Accounts Payable $47,520 To record inventory purchased on account (net method)

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