James Company experienced the following events during its first accounting period.(1)Purchased $10,000 of inventory on account under terms 1/10 n/30.(2)Returned $2,000 of the inventory purchased in Event 1.(3)Paid the remaining balance in account payable for the inventory purchased in Event 1.If the Company pays the account payable after the discount period has expired, how much cash will be required to settle the liability?

Question

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- The cost of inventory purchased in Event 1 is $10,000.
- The return of inventory in Event 2 reduces the cost to $8,000.
- If the Company pays after the discount period has expired, it will not be eligible for the 1% discount, and therefore will have to pay the full amount of $8,000.
- Therefore, $8,000 in cash will be required to settle the liability.

James Company Experienced the Following Events During Its First Accounting