A company that uses the perpetual inventory method purchases inventory of $1,000 on account with terms of 2/10 net/30. Defective inventory of $200 is returned 2 days later. Which of the following entries would be made to record payment for the inventory if the payment is made within 10 days?
A) The accounting entry would be an $800 debit to Accounts payable and an $800 credit to Cash.
B) The accounting entry would be a $784 debit to Accounts payable, a $16 debit to Inventory and an $800 credit to Cash.
C) The accounting entry would be a $16 debit to Inventory, an $800 debit to Accounts payable and an $816 credit to Cash.
D) The accounting entry would be an $800 debit to Accounts payable, a $16 credit to Inventory and a $784 credit to Cash.

Question

Quizplus · Accepted Answer

The company receives a 2% discount on the remaining $800 of inventory, which is $16. Therefore, the payment is $784 in cash, and the inventory account is credited by $16 to reflect the discount.

A Company That Uses the Perpetual Inventory Method Purchases Inventory