Merchandise with an invoice price of $2,000 was purchased on October 3, terms 1/15, n/60. The company uses the net method to record purchases. The entry to record the cash payment of this purchase obligation on October 17 is:
A) Debit Accounts Payable $1,980; credit Cash $1,980.
B) Debit Accounts Payable $2,000; credit Cash $2,000.
C) Debit Accounts Payable $1,980; credit Discounts Lost $20; credit Cash $2,000.
D) Debit Accounts Payable $2,000; credit Merchandise Inventory $20; credit Cash $1,980.
E) Debit Accounts Payable $2,000; credit Merchandise Inventory $40; credit Cash $1,960.

Question

Quizplus · Accepted Answer

The net method assumes discounts are taken. The invoice is initially recorded at its net amount ($2,000 less 1% = $1,980). Since the payment is within the discount period, the payment is $1,980, matching the recorded payable amount.

Merchandise with an Invoice Price of $2,000 Was Purchased on October