A company purchases merchandise on November 2 at a $2,400 invoice price (terms 3/10,n/30)and then pays all amounts owed on November 12.Using perpetual inventory and net purchases methods,what are the proper entries to record these two transactions?
A) $$\begin{array} { | c | l| r | r | }
\hline \text { Nov. 2 } & \text { Merchardise Inventory } & 2,400 & \
\hline & \text { Accounts Payable } & & 2,400 \
\hline
\end{array}$$ $$\begin{array} { | c | c | r | r | }
\hline \text { Nov. 11 } & \text { Accounts Payable } & 2,400 & \
\hline & \text { Cash } & & 2,400 \
\hline
\end{array}$$
B) $$\begin{array} { | c | c | r | r | }
\hline \text { Nov. 2 } & \text { Merchandise Inventory } & 2,328 & \
\hline & \text { Accounts Payable } & & 2,328 \
\hline
\end{array}$$
$$\begin{array} { | c | c | r | r | }
\hline \text { Nov. 11 } & \text { Accounts Payable } & 2,328 & \
\hline & \text { Cash } & & 2,328 \
\hline
\end{array}$$
C) $$\begin{array} { | c | l| r | r | }
\hline \text { Nov. 2 } & \text { Merchandise Inventory } & 2,328 & \
\hline & \text { Accounts Payable } & & 2,328 \
\hline
\end{array}$$
$$\begin{array} { | l | l | r | r | }
\hline \text { Nov. 11 } & \text { Accounts Payable } & 2,328 & \
\hline & \text { Purchase Discounts Lost } & 72 & \
\hline & \text { Cash } & & 2,400 \
\hline
\end{array}$$
D) $$\begin{array} { | c | c | r | r | }
\hline \text { Nov. 2 } & \text { Merchandise Inventory } & 2,328 & \
\hline & \text { Accounts Payable } & & 2,328 \
\hline
\end{array}$$
$$\begin{array} { | l | l | r | r | }
\hline \text { Nov. 11 } & \text { Accounts Payable } & 2,328 & \
\hline & \text { Inventory } & 72 & \
\hline & \text { Cash } & & 2,400 \
\hline
\end{array}$$
E) $$\begin{array} { | c | c | r | r | }
\hline \text { Nov. 2 } & \text { Merchandise Inventory } & 2,328 & \
\hline & \text { Accounts Payable } & & 2,328 \
\hline
\end{array}$$
$$\begin{array} { | l | l | r | r | }
\hline \text { Nov. 11 } & \text { Accounts Payable } & 2,328 & \
\hline & \text { Purchase Discounts Lost } & 72 & \
\hline & \text { Cash } & & 2,400 \
\hline
\end{array}$$

Question

A company purchases merchandise on November 2 at a $2,400 invoice price (terms 3/10,n/30)and then pays all amounts owed on November 12.Using perpetual inventory and net purchases methods,what are the proper entries to record these two transactions?
A) $$\begin{array} { | c | l| r | r | } 
\hline \text { Nov. 2 } & \text { Merchardise Inventory } & 2,400 & \
\hline & \text { Accounts Payable } & & 2,400 \
\hline
\end{array}$$ $$\begin{array} { | c | c | r | r | } 
\hline \text { Nov. 11 } & \text { Accounts Payable } & 2,400 & \
\hline & \text { Cash } & & 2,400 \
\hline
\end{array}$$
B) $$\begin{array} { | c | c | r | r | } 
\hline \text { Nov. 2 } & \text { Merchandise Inventory } & 2,328 & \
\hline & \text { Accounts Payable } & & 2,328 \
\hline
\end{array}$$
$$\begin{array} { | c | c | r | r | } 
\hline \text { Nov. 11 } & \text { Accounts Payable } & 2,328 & \
\hline & \text { Cash } & & 2,328 \
\hline
\end{array}$$
C) $$\begin{array} { | c | l| r | r | } 
\hline \text { Nov. 2 } & \text { Merchandise Inventory } & 2,328 & \
\hline & \text { Accounts Payable } & & 2,328 \
\hline
\end{array}$$
$$\begin{array} { | l | l | r | r | } 
\hline \text { Nov. 11 } & \text { Accounts Payable } & 2,328 & \
\hline & \text { Purchase Discounts Lost } & 72 & \
\hline & \text { Cash } & & 2,400 \
\hline
\end{array}$$
D) $$\begin{array} { | c | c | r | r | } 
\hline \text { Nov. 2 } & \text { Merchandise Inventory } & 2,328 & \
\hline & \text { Accounts Payable } & & 2,328 \
\hline
\end{array}$$
$$\begin{array} { | l | l | r | r | } 
\hline \text { Nov. 11 } & \text { Accounts Payable } & 2,328 & \
\hline & \text { Inventory } & 72 & \
\hline & \text { Cash } & & 2,400 \
\hline
\end{array}$$
E) $$\begin{array} { | c | c | r | r | } 
\hline \text { Nov. 2 } & \text { Merchandise Inventory } & 2,328 & \
\hline & \text { Accounts Payable } & & 2,328 \
\hline
\end{array}$$
$$\begin{array} { | l | l | r | r | } 
\hline \text { Nov. 11 } & \text { Accounts Payable } & 2,328 & \
\hline & \text { Purchase Discounts Lost } & 72 & \
\hline & \text { Cash } & & 2,400 \
\hline
\end{array}$$

Quizplus · Accepted Answer

Using perpetual inventory method, the entry to record the purchase is:

Merchandise Inventory          2,400
Accounts Payable                          2,400

To record the payment on November 12, the entry is:

Accounts Payable                          2,400
Cash                                               2,331.60 (2,400 - 3% discount)

Using net purchases method, we first calculate the net purchases:

Purchase price                          2,400
Less: Purchase discount         (72)
Net purchases                               2,328

Then, we record the net purchases and accounts payable:

Merchandise Inventory           2,328
Accounts Payable                           2,328

To record the payment on November 12:

Accounts Payable                          2,400
Cash                                               2,331.60 (2,400 - 3% discount)

A Company Purchases Merchandise on November 2 at a $2,400