A company purchased inventory for $2,000 from a vendor on account, FOB shipping point, with terms of 2/10, n/30. The company paid $100 cash for freight in. The entry to record payment of invoice within 10 days by the purchaser would include: (Assume a perpetual inventory system)
A)a debit to Accounts Payable for $1,960 and a credit to Cash for $1,960.
B)a debit to Accounts Payable for $2,000, a debit to Merchandise Inventory for $100 and a credit to Cash for $1,960.
C)a debit to Accounts Payable for $2,000, a credit to Merchandise Inventory for $40 and a credit to Cash for $1,960.
D)a debit to Accounts Payable, for$1,960 a debit to Merchandise Inventory for $40 and a credit to Cash for $2,000.

Question

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The company receives a 2% discount on the $2,000 purchase, reducing the amount payable to $1,960. The $40 discount is credited to Merchandise Inventory, reflecting the reduced cost of inventory.

A Company Purchased Inventory for $2,000 from a Vendor on Account