On May 1, Anders Company purchased merchandise in the amount of $5,800 from Shilling, with credit terms of 2/10, n/30. Anders uses the perpetual inventory system and the gross method table. The journal entry or entries that Anders will make on May 1 is:
A) $$\begin{array} { | l | r | r | }
\hline \text { Merchandite Inventory } & 5,800 & \
\hline \text { Cash } & & 5,800 \
\hline
\end{array}$$
B) $$\begin{array} { | l | r | r | }
\hline \text { Merchandite Inventory } & 5,800 & \
\hline \text { Accounts payable } & & 5,800 \
\hline
\end{array}$$
C) $$\begin{array} { | l | r | r | }
\hline \text { Purchases } & 5,800 & \
\hline \text { Accounts payable } & & 5,800 \
\hline
\end{array}$$
D) $$\begin{array} { | l | r | r | }
\hline \text { Accounts payable } & 5,800 & \
\hline \text { Sales } & & 5,800 \
\hline
\end{array}$$
E) $$\begin{array} { | l | r | r | }
\hline \text { Sales } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$$

Question

On May 1, Anders Company purchased merchandise in the amount of $5,800 from Shilling, with credit terms of 2/10, n/30. Anders uses the perpetual inventory system and the gross method table. The journal entry or entries that Anders will make on May 1 is:
A) $$\begin{array} { | l | r | r | } 
\hline \text { Merchandite Inventory } & 5,800 & \
\hline \text { Cash } & & 5,800 \
\hline
\end{array}$$
B) $$\begin{array} { | l | r | r | } 
\hline \text { Merchandite Inventory } & 5,800 & \
\hline \text { Accounts payable } & & 5,800 \
\hline
\end{array}$$
C) $$\begin{array} { | l | r | r | } 
\hline \text { Purchases } & 5,800 & \
\hline \text { Accounts payable } & & 5,800 \
\hline
\end{array}$$
D) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts payable } & 5,800 & \
\hline \text { Sales } & & 5,800 \
\hline
\end{array}$$
E) $$\begin{array} { | l | r | r | } 
\hline \text { Sales } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The journal entry should debit Inventory for the cost of the merchandise and credit Accounts Payable for the amount owed to Shilling. Since the credit terms are 2/10, n/30, if Anders pays within 10 days, they can take a 2% discount. Therefore, Anders should record a potential discount by debiting Accounts Payable for the invoice amount and crediting Purchase Discounts for the amount of the discount. Since the gross method table is used, the discount will be recorded if Anders chooses to pay within the discount period. The journal entry is:

Inventory     $5,800
Accounts Payable     $5,800

To record the purchase of merchandise on credit terms.

Accounts Payable     $5,800
Purchase Discounts     $116 (2% x $5,800)
Inventory     $5,684

To record the payment of the invoice within the discount period.

On May 1, Anders Company Purchased Merchandise in the Amount Merchandite Inventory 5,800 Cash 5,800\begin{array} { | l | r | r | } \hline \text { Merchandite Inventory } & 5,800 & \\\hline \text { Cash } & & 5,800 \\\hline\end{array} Merchandite Inventory Cash ​5,800​5,800​​

On May 1, Anders Company Purchased Merchandise in the Amount $\begin{array} { | l | r | r | } \hline \text { Merchandite Inventory } & 5,800 & \\\hline \text { Cash } & & 5,800 \\\hline\end{array}$