Question

A company purchased $2,500 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $550 worth of merchandise. On July 12, 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 12 is:

Multiple Choice

• Debit Merchandise Inventory $1,950; credit Cash $1,950.

• Debit Cash $1,950; credit Accounts Payable $1,950.

• Debit Accounts Payable $1,950; credit Merchandise Inventory $39; credit Cash $1,911.

• Debit Accounts Payable $2,500; credit Cash $2,500.

• Debit Accounts Payable $1,950; credit Cash $1,950.

Answer 1

Date	Account Titles	Debit $	Credit $
July.12	Accounts Payable ( 2,500 - 550 )	1,950
	Merchandise Inventory ( 1,950 x 2%)		39
	Cash ( 1,950 - 39 )		1,911

Correct answer is option 3.