Farthington Soccer Supplies purchases merchandise from a supplier on credit, terms 2/10, n/30 for $15,300. Assume the company uses a perpetual inventory system, and records purchases using the gross method. When recording the payment of the invoice within the discount period in its cash disbursement journal, Farthington would enter:

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Under the gross method, the purchase is recorded at the full invoice amount initially. Therefore, when Farthington records the payment of the invoice within the discount period, they will debit Accounts Payable for the full amount of $15,300 and credit Cash for the discounted amount of $14,994. They will also credit Inventory for the amount of the discount, which is $306 ($15,300 x 2%). Therefore, the correct entry is:
Accounts Payable Dr. $15,300
Cash Cr. $14,994
Inventory Cr. $306

Farthington Soccer Supplies Purchases Merchandise from a Supplier on Credit