Orleans Enterprises purchased $37,500 of merchandise on account,terms 2/10,n/30. Assuming Orleans uses the net price method to account for purchase discounts,the
Journal entry to record the purchase would include a:

Question

Quizplus · Accepted Answer

When using the net price method, the invoice is initially recorded at the full amount of $37,500 (debit to Inventory). Then, the potential purchase discount of 2% ($750) is calculated and recorded as a credit to Accounts Payable for $750. If the discount is taken within the discount period, the entry would also include a debit to Purchase Discounts (not Purchase Discounts Lost). However, since the question does not specify whether or not the discount was taken, we do not know if this entry would be necessary. Therefore, the correct answer is B.

Orleans Enterprises Purchased $37,500 of Merchandise on Account,terms 2/10,n/30