Juniper Company, Inc. uses a perpetual inventory system. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise. On August 16, it paid the full amount due. The correct journal entry to record the payment on August 16 is:

Question

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The original purchase was $9,750, and after returning $1,500, the payable amount is $8,250. Paying within the discount period (1/10) gives a 1% discount on $8,250, which is $82.50. Therefore, the payment is $8,167.50, and the discount is recorded as a reduction in Merchandise Inventory.