(Appendix) A purchase was made for $200 on account with credit terms of 2/10, n/30. The purchase was recorded using the net-price method. If payment is made 25 days later, the entry to record the payment will be to

Question

Quizplus · Accepted Answer

Since the purchase was recorded using the net-price method, the original entry would be to debit Accounts Payable for the net amount of the purchase after the discount, which is $196 ($200 less 2% discount of $4). When payment is made 25 days later, the entry would be to credit Cash for $200, which is the amount paid, and debit Purchases Discounts Lost for $4, which is the discount that was not taken. Therefore, the entry to record the payment would be to debit Accounts Payable for $196, debit Purchases Discounts Lost for $4, and credit Cash for $200.

(Appendix) a Purchase Was Made for $200 on Account with Credit