Juniper Company uses a perpetual inventory system and the gross method of accounting for purchases. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise.
- On August 16, it paid the full amount due. The correct journal entry to record the payment on August 16 is:
A) Debit Accounts Payable $8,250; credit Merchandise Inventory $82.50; credit Cash $8,167.50.
B) Debit Cash $8,250; credit Accounts Payable $8,250.
C) Debit Accounts Payable $9,750; credit Merchandise Inventory $97.50; credit Cash $9,652.50.
D) Debit Accounts Payable $8,167.50; credit Cash $8,167.50.
E) Debit Merchandise Inventory $8,250; credit Cash $8,250.

Question

Quizplus · Accepted Answer

The original purchase was $9,750, and after returning $1,500, the payable amount is $8,250. The payment is made within the discount period, so a 1% discount ($82.50) is applied. The journal entry reflects the reduction in inventory for the discount and the cash payment.

Juniper Company Uses a Perpetual Inventory System and the Gross