Question

A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, the correct journal entry to record the payment on July 28 is:

•  Debit Accounts Payable $1,800; credit Cash $1,800.

•  Debit Accounts Payable $1,600; credit Merchandise Inventory $32; credit Cash $1,568.

•  Debit Cash $1,600; credit Accounts Payable $1,600.

•  Debit Merchandise Inventory $1,600; credit Cash $1,600.

•  Debit Accounts Payable $1,600; credit Cash $1,600.

Answer 1

Correct Entry will be Debit Account Payable $1600, Credit Cash $1600

Explanation:-

Payment twas made on 28 July  , hence discount period already over , so no adjustment is required for discount.

For return of inventory worth $200, on dated 7 july hence , Merchandised return was already booked and accordingly account payable account was already adjusted on such date.