a company uses the perpetual inventory system purchased inventory for $970,000 on account with terms of...

a company uses the perpetual inventory system purchased inventory for $970,000 on account with terms of 3/7, n/20 which of the following records the payment made 15 days after the date of invoice

Expert Solution

The discount term is “3/7, n/20”

This means that a 3% discount will be given if payment for purchases are made within 7 days.

Journal Entries

---Note #2 entry is entry for Payment

Entries if Gross Method is being used:

Accounts title	Debit	Credit
Inventory	$ 9,70,000.00
Accounts Payable		$ 9,70,000.00
(purchases made)

Accounts Payable	$ 9,70,000.00
Cash		$ 9,70,000.00
(cash paid)

Entries if Net Method is being Used:

Accounts title	Debit	Credit
Inventory	$ 9,40,900.00
Accounts Payable		$ 9,40,900.00
(purchases made)

Accounts Payable	$ 9,40,900.00
Inventory	$ 29,100.00
Cash		$ 9,70,000.00
(Cash paid)

ekkarill92 answered 1 year ago

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