Malone Corporation uses the perpetual inventory method. On March 1, it purchased $60,000 of inventory, terms 2/10, n/30. On March 3, Malone returned goods that cost $6,000. On March 9, Malone paid the supplier. On March 9, Malone should credit
A) purchase discounts for $1,200.
B) inventory for $1,200.
C) purchase discounts for $1,080.
D) inventory for $1,080.

Question

Quizplus · Accepted Answer

Malone Corporation would credit inventory for $1,080 on March 9. This is because they returned goods worth $6,000, reducing the payable amount to $54,000. With the 2% discount for early payment (2/10, n/30), the discount amounts to $54,000 * 0.02 = $1,080. Since Malone uses the perpetual inventory method, this discount is directly credited to the inventory account, reflecting the reduced cost of the inventory purchased.

Malone Corporation Uses the Perpetual Inventory Method