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Prepare entry if necessary assuming that buyer purchased

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Reference no: EM132581986

Purchase Corp. has been purchasing more inventory from Kelly Ltd. in recent years. Kelly Ltd. offers all its customers a rebate of $0.50 per unit on each and every unit purchased in the year if they buy more than 100,000 units in a calendar year. In 2020, Purchase Corp. has already purchased 110,000 units by September 30, 2020. Purchase Corp. has a September 30 year end. Kelly Ltd. Calculates and pays any rebates in January of the subsequent year.

Required:

Question (a) Prepare the entry, if necessary, that Purchase Corp. should record if it is preparing 2020 annual financial statements assuming that, of the 110,000 units purchased, 30,000 units are still on hand on September 30.

Question (b) Prepare the entry, if necessary, assuming that Buyer has only purchased 30,000 units in the first 9 months. 7,000 units remain on hand.

Question (c) Prepare the entry, if necessary, assuming that Buyer has only purchased 90,000 units in the first 9 months. 8,000 units remain on hand.

Question (d) Identify the accounting issue with both requirements (a), (b), and/or (c). Explain why you made an entry in requirements (a),(b), and/or (c), or why you did not make an entry in relation to the accounting issue.

 

Reference no: EM132581986

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