A company purchased $1,800 of merchandise on July 5 with terms 2/10,n/30.On July 7,it returned $200 worth of merchandise.On July 8,it paid the full amount due.Assuming the company uses the gross method to record purchases,the journal entry to record the cash paid on July 8 is:
A)Debit Accounts Payable,$1,800; Credit Merchandise Inventory,$36; Credit Cash,$1,764.
B)Debit Accounts Payable,$1,568; Credit Cash,$1,568.
C)Debit Accounts Payable,$1,600; Credit Merchandise Inventory,$32; Credit Cash,$1,568.
D)Debit Accounts Payable,$1,568; Debit Merchandise Inventory,$32; Credit Cash,$1,600.
E)Debit Accounts Payable,$1,600; Credit Cash,$1,600.

Question

Quizplus · Accepted Answer

To find the amount to pay, we need to subtract the return from the original purchase:
$1,800 - $200 = $1,600
Since the terms are 2/10,n/30, the company can take a 2% discount if paying within 10 days. Since they paid on day 3 (July 8), they are within the discount period and can take advantage of the discount. 
The discount amount is:
$1,600 x 2% = $32
Therefore, the journal entry to record the payment on July 8 would be:
Debit Accounts Payable,$1,600;
Credit Merchandise Inventory,$32;
Credit Cash,$1,568.

A Company Purchased $1,800 of Merchandise on July 5 with Terms