Question

On June 15, a retailer purchases merchandise on account from a supplier for $2,000 terms 3/10, n/30. On June 18, the retailer returns merchandise purchased for $600 for a reduction in the amount owing. On June 22, the retailer pays their account. Under a perpetual inventory system the journal entry to record the payment includes:

a. $1,400 will be debited to Accounts Payable, $1,358 will be credited to Cash and $42 will be credited to Inventory.

b. $1,358 will be credited to Cash, $1,400 will be debited to Accounts Payable and $42 will be credited to Discounts.

c. $1,358 will be credited to Cash, $1,358 will be debited to Accounts Payable.

d. $1,400 will be credited to Cash, $1,358 will be debited to Accounts Payable, and $42 will be debited to Inventory.

Answer 1

Solution :
	Calculation of amount payable as on June 22 to supplier
	Cost of purchase of material	2,000
	Less: Material Return	600
	Net amount payable	$                     1,400
	Less: Discount @ 3% on timely payment	$                           42
	Entry of the same is passes as below,
Journal Entries
Date	Account Title and explanation	Debit	Credit
June , 22	Account Payable	$                     1,400
	Purchase Discount		$                             42
	Cash		$                       1,358
Answer = Option B
=	$1,358 will be credited to Cash, $1,400 will be debited to Accounts Payable and $42 will be credited to Discounts.