Elkins Corporation uses the perpetual inventory method. On March 1, it purchased $30,000 of inventory, terms 2/10, n/30. On March 3, Elkins returned goods that cost $3,000. On March 9, Elkins paid the supplier. On March 9, Elkins should credit
A) purchase discounts for $600.
B) inventory for $600.
C) purchase discounts for $540.
D) inventory for $540.

Question

Quizplus · Accepted Answer

Elkins took advantage of the 2% discount on the net purchase ($30,000 - $3,000 = $27,000). 2% of $27,000 is $540, so the inventory account is credited by this amount to reflect the reduced cost of the inventory due to the payment within the discount period.

Elkins Corporation Uses the Perpetual Inventory Method