A company that uses the perpetual inventory system purchases inventory for $64,000 on account,with terms of 2/10,n/30.Which of the following is the journal entry to record the payment made within 10 days?
A) a debit to Accounts Payable for $64,000, a credit to Cash for $1,280, and a credit to Merchandise Inventory for $62,720
B) a debit to Accounts Payable for $64,000, a credit to Merchandise Inventory for $1,280, and a credit to Cash for $62,720
C) a debit to Merchandise Inventory for $1,280, a debit to Accounts Payable for $64,000, and a credit to Cash for $65,280
D) a debit to Accounts Payable for $62,720, a debit to Merchandise Inventory for $1,280, and a credit to Cash for $64,000

Question

Quizplus · Accepted Answer

When using the perpetual inventory system, the purchase is recorded with a debit to Inventory and a credit to Accounts Payable. The prompt gives us terms of 2/10, n/30, which means the company can receive a 2% discount if they pay within 10 days, and the full amount is due within 30 days.

If the company chooses to pay within 10 days, they will only owe $62,720 ($64,000 - $1,280 discount), and the journal entry would be:

Debit Accounts Payable $62,720
Credit Inventory $1,280
Credit Cash $61,440

Therefore, the correct answer is B: a debit to Accounts Payable for $64,000, a credit to Merchandise Inventory for $1,280, and a credit to Cash for $62,720.

A Company That Uses the Perpetual Inventory System Purchases Inventory