Demonstration Problem 8-4
The Kavendish Company, a manufacturer of commercial-use washing machines, sold 50 units
to the E-z Sleep Motel chain on January 14, 2016. The units have a list price of $800 each, but
E-z Sleep was given a 25% trade discount. The terms of the sale were 2/10, n30. E-z Sleep uses
a periodic inventory system.
Required:
1. Prepare the journal entries to record the purchase by E-z Sleep on January 14 and payment on
January 23, 2016, using the gross method of accounting for purchase discounts.
2. Prepare the journal entries to record the purchase on January 14 and payment on February 13,
2016, using the gross method of accounting for purchase discounts.
3. Repeat requirements 1 and 2 using the net method of accounting for purchase discounts.