Question

Emma Co, sold to Isabella Co. merchandise on account FOB shipping point, 1/10, net 30, for $10,500. Emma Co, prepaid the $820 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make for the payment for the merchandise if Isabella Co, pays within the discount period? Oa. Accounts Payable --Emma Co., debit $10,500; Cash, credit $10,500 Ob. Accounts Payable-Emma Co., debit $11,215; Cash, credit $11,215 Oc. Accounts Payable-Emma Co., debit $10,500; Freight In, debit $820; Cash, credit $11,320 Od. Accounts Payable-Emma Co., debit $11,320; Merchandise Inventory, debit $105; Cash, credit $11,425

Answer 1

Credit Debit $ 10,395 Account Titles and Explanation Inventory ($10,500-(10,500*1%)] Accounts payable-Emma Co. (To record the purchase of inventory) $ 10,395 $ 820 Inventory Accounts payable-Emma Co. (To record the freight charges) $ 820 $ 11,215 Accounts payable-Emma Co. ($10,395+$820) Cash (To record the payment of accounts payable) $ 11,215 Note: Assume net method of accounting for cash discounts. Hence, the correct option is B. Accounts payable-Emma Co., debit $11,215; Cash credit $11,215.