Question

on the balance sheet of a retailer the merchandise inventory account

A company that uses the perpetual inventory system purchases inventory for $60,000 on account, with terms of 2/10, n/30. Which of the following is the jounal entry to record the payment made within 10 days? OA a debit to Accounts Payable for $60,000, a credit to Merchandise Inventory for $1,200, and a credit to Cash for $58,800 B. a debit to Accounts Payable for $58,800, a debit to Merchandise Inventory for $1,200, and a credt to Cash for $00,000 O C. a debit to Merchandise Inventory for $1,200, a debit to Accounts Payable for $00,000, and a credt to Cash for $61,200 O D. a debit to Accounts Payable for $60,000, a oredit to Cash for $1,200, and a credit to Merchandise Imventory for $58,800

Answer 1

Purchase amount = $60,000

Discount = 2%

Discount amount = Purchase x Discount rate

= 60,000 x 2%

= $1,200

Cash to be paid = Purchase - Discount

= 60,000 - 1,200

= $58,800

Journal entry for payment within discount period will be as under:

	Accounts payable	60,000
	Merchandise inventory		1,200
	Cash		58,800

First option is the correct option.

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