Heidi's Accessories bought 50 necklaces for $10 each on account.The invoice included a 6% sales tax and payment terms of 2/10,n/30.In addition,5 necklaces were returned prior to payment.The entry to record the payment (within the discount period)would include:

Question

Quizplus · Accepted Answer

The cost of the 50 necklaces is 50 x $10 = $500. 6% sales tax adds $30 to the total. Therefore, the total amount due is $530.

After returning 5 necklaces, the amount due is $500 + $30 - (5 x $10) = $450.

2/10,n/30 means that a 2% discount is available if payment is made within 10 days, otherwise the full amount is due within 30 days.

If payment is made within the discount period, the discount is $450 x 2% = $9.

Therefore, the entry to record the payment (within the discount period) would be: 
Debit Accounts Payable $450 
Credit Cash $468 
Credit Purchase Discounts $9 
Credit Sales Tax Payable $30.

The correct answer is B because it shows the credit to Cash for the discounted amount of $468.

Heidi's Accessories Bought 50 Necklaces for $10 Each on Account