On June 1, Atkinson Company purchased $7,000 of inventory on account from Donnie Company. Donnie Company offers a 5% discount if payment is received within 15 days. Atkinson Company records the purchase using the gross method and the perpetual inventory system. Atkinson Company makes the payment for the inventory on June 10. The journal entry on June 10 by Atkinson Company includes ________.
A) a debit to Cash for $7,000
B) a credit to Cash for $6,650
C) a debit to Inventory for $350
D) a credit to Interest Expense for $350

Question

Quizplus · Accepted Answer

Atkinson Company pays within the discount period, so they receive a 5% discount on the $7,000 purchase, which is $350. Therefore, they pay $6,650 in cash.

On June 1, Atkinson Company Purchased $7,000 of Inventory on Account