Exercise-6 (Gross method of recording purchases)

By: Rashid Javed | Updated on: July 12th, 2023

United Company made the following transactions during the month of March:

  • Mar.05: Purchased merchandise worth $21,600; credit terms were 2/20, n/45.
  • Mar.08: Returned merchandise to vendor worth $5,000 (gross).
  • Mar.20: Payment made for merchandise purchased on March 5.

The company uses gross method of recording purchases.

Required: Prepare journal entries to record the above transactions assuming the United Company uses:

  1. a perpetual inventory method
  2. a periodic inventory method


(1) Journal entries if perpetual inventory method is used:


*21,600 × 0.02 = 432
21,600 – 432 = 21,168

(2) Journal entries if periodic inventory method is used:


*21,600 × 0.02 = $432
21,600 -432 = $21,168

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3 Comments on Exercise-6 (Gross method of recording purchases)
  1. Jaytee

    Can you let me know why there is no difference between these 2 methods?

    1. Rashid Javed

      There is a salient difference between the two. Look at the account titles used under two methods, not just the amounts.

  2. Kaspar Keroney

    Am a new Accounting learn, your website really helping me a lot, am so happy to be part of this website

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