On June 1, Johnson Company purchased $8,000 of inventory on account from Schmid Company on June 1. Schmid Company offers a 4% discount if payment is received within 15 days. Johnson Company records the purchase using the net method and the perpetual inventory system. Johnson Company paid for the inventory on June 30. The journal entry on June 30 by Johnson Company includes ________.
A) a debit to Accounts Payable for $7,680
B) a debit to Accounts Payable for $8,000
C) a credit to Interest Expense for $320
D) a credit to Cash for $7,680

Question

Quizplus · Accepted Answer

Johnson Company records the purchase using the net method, which means that the discount is recorded when the invoice is paid. The amount of the discount is $8,000 x 4% = $320. The journal entry on June 30 by Johnson Company includes a debit to Accounts Payable for $7,680 ($8,000 - $320) and a credit to Cash for $7,680.

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