A company that uses the perpetual inventory system purchases inventory for $60,0

Question

A company that uses the perpetual inventory system purchases inventory for $60,000 on account, with terms of 3/10, n/30. Which of the following is the journal entry to record the payment made within 10 days? O A. a debit to Accounts Payable for $60,000, a credit to Cash for $1,800, and a credit to B. a debit to Merchandise Inventory for $1,800, a debit to Accounts Payable for $60,000, and a O C. a debit to Accounts Payable for $60,000, a credit to Merchandise Inventory for $1,800, and O D. a debit to Accounts Payable for $58,200, a debit to Merchandise Inventory for $1,800, and a Merchandise Inventory for $58,200 credit to Cash for $61,800 a credit to Cash for $58,200 credit to Cash for $60,000 Ex

Explanation / Answer

C) A debit to Accounts Payable for $60000, a credit to Merchandise Inventory for $1800 and a credit to cash for $58200

Workings:

Discount = $60000 x 3% = $1800, The merchandise inventory will be reduced by this $1800 as the discount will reduce the net purchase cost of inventory by $1800

Payment = $60000 - $1800 = $58200

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