Home › ACCA › Financial Accounting › Purchase And Sales Discounts › Under the perpetual system a buyer purchased 50 …
Under the perpetual system a buyer purchased 50 items at $10 each on account, terms 2/10 net 30, and pays within the discount period. What is the payment entry?
ADebit Accounts Payable $500; credit Cash $490; credit Merchandise Inventory $10
BDebit Accounts Payable $500; credit Cash $500
CDebit Accounts Payable $490; credit Cash $490
DDebit Accounts Payable $500; credit Cash $490; credit Purchases Discounts $10
Answer & Solution
Correct answer: A. Debit Accounts Payable $500; credit Cash $490; credit Merchandise Inventory $10
1. Recorded payable = 50 x $10 = $500.
2. Discount taken = $500 x 2% = $10, so cash paid = $500 - $10 = $490.
3. Under perpetual, the buyer credits Merchandise Inventory $10 so inventory is carried at the $490 actually paid.
4. Option B ignores the discount; C understates the payable; Purchases Discounts (option D) is a periodic-system account.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §3.3.1 "Discounts - The Buyer", p.97_
Related questions
A seller recorded a sale at the discounted $735 under the NET method but the customer paysA seller recorded a $750 sale under the GROSS method (terms 2/10 net 30) but the customer A seller using the NET method sells 50 items on account for $15 each, terms 2/10 net 30, eA seller using the GROSS method sells 50 items on account for $15 each, terms 2/10 net 30,An invoice carries the terms "2/10, net 30". What do these terms mean?