On June 1, Kennedy Company purchased $8,000 of inventory on account from Sterner Company. Sterner Company offers a 5% discount if payment is received within 15 days. Kennedy Company records the purchase using the net method and the perpetual inventory system. The journal entry on June 1 by Kennedy Company includes ________.
A) a debit to Inventory for $8,000
B) a credit to Accounts Payable for $8,000
C) a credit to Cash for $7,600
D) a debit to Inventory for $7,600

Question

Quizplus · Accepted Answer

Under the net method, Kennedy Company records the inventory purchase at the net amount, considering the discount. Therefore, the inventory is recorded at $7,600 ($8,000 - 5% of $8,000).

On June 1, Kennedy Company Purchased $8,000 of Inventory on Account