Avery Inc.uses the periodic inventory system.On February 1,the corporation purchased inventory on account for $10,000.The terms were 3/10,n/30.On February 2,it returned damaged goods worth $400 to the supplier and was granted an allowance.Give the journal entry for the payment if the invoice is paid after the discount period.

Question

Quizplus · Accepted Answer

The journal entry for the purchase on February 1 would be:

Inventory dr. $10,000
Accounts payable cr. $10,000

On February 2, the return and allowance would be recorded as:

Accounts payable dr. $400
Purchase returns and allowances cr. $400

If the invoice is paid after the discount period, the journal entry for the payment would be:

Accounts payable dr. $9,700 ($10,000 - $300)
Inventory cr. $9,700

This reflects the payment for the inventory, net of the discount taken, and reduces the inventory asset accordingly. The correct answer is C.

Avery IncUses the Periodic Inventory System