Asked by Brittany Shackelford on May 23, 2024
Verified
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:
A) Debit Merchandise Inventory $1,600; credit Cash $1,600.
B) Debit Cash $1,600; credit Accounts Payable $1,600.
C) Debit Accounts Payable $1,600; credit Merchandise Inventory $32; credit Cash $1,568.
D) Debit Accounts Payable $1,800; credit Cash $1,800.
E) Debit Accounts Payable $1,600; credit Cash $1,600.
Perpetual Inventory System
This method of accounting instantly documents inventory sales or purchases through computerized point-of-sale systems along with enterprise asset management software.
Gross Method
An accounting practice for recording inventory purchases without deducing available purchase discounts, presenting the gross cost in financial statements.
Cash Payment
Cash payment refers to transactions where the payment for goods or services is made immediately using physical currency or through electronic means that represent immediate funds transfer.
- Determine and appreciate the parts and significance of year-end inventory.
Verified Answer
TM
Tasheka MartinMay 23, 2024
Final Answer :
C
Explanation :
The correct journal entry reflects the payment within the discount period (2/10, n/30) after returning $200 worth of merchandise. The initial purchase was $1,800, and after returning $200, the amount payable becomes $1,600. The 2% discount on $1,600 is $32 ($1,600 * 2%), so the company pays $1,568 ($1,600 - $32) and credits the discount to Merchandise Inventory.
Learning Objectives
- Determine and appreciate the parts and significance of year-end inventory.