Question

A company purchased inventory for $3,000 from a vendor on account, FOB shipping point, with terms of 2/15, n/30. The company paid $100 cash for freight in. The entry to record the payment of the invoice within 15 days of the invoice date by the purchaser would include ________. (Assume a perpetual inventory system.)

Question 9 options:

A) a debit to Accounts Payable for $2,940, a debit to Merchandise Inventory for $60, and a credit to Cash for $3,000

B) a debit to Accounts Payable for $3,000, a credit to Merchandise Inventory for $60, and a credit to Cash for $2,940

C) a debit to Accounts Payable for $2,940 and a credit to Cash for $2,940

D) a debit to Accounts Payable for $3,000, a credit to Merchandise Inventory for $100, and a credit to Cash for $2,900

Answer 1

Cost of inventory purchased = $3,000

Purchase terms = 2/15, n/30

It means 2 percent discount will be allowed if payment is made with in 15 days.

Discount amount = Cost of inventory x Discount rate

= 3,000 x 2%

= $60

Cash to be paid = Cost of inventory - Discount amount

= 3,000 - 60

= $2,940

Hence, under the perpetual inventory system, entry will be made :

Journal

Account Title and Explanation	Debit	Credit
Accounts payable	3,000
Merchandise inventory		60
Cash		2,940

Correct option is (B)

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