Emma Co. sold to Isabella Co. merchandise on account FOB shipping point, 2/10, n

Question

Emma Co. sold to Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for $15,000. Emma Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make to record the payment for the merchandise if Isabella Co. pays within the discount period?

Accounts Payable—Emma Co., debit $15,750; Inventory, debit $300; Cash, credit $16,050

Accounts Payable—Emma Co., debit $15,000; Freight In, debit $750; Cash, credit $15,750

Accounts Payable—Emma Co., debit $15,450; Cash, credit $15,450

Accounts Payable—Emma Co., debit $15,000; Cash, credit $15,000

Explanation / Answer

Answer is

Accounts Payable—Emma Co., debit $15,450; Cash, credit $15,450

2/10 means 2%

15000 * 2%= 300

Shipping charges 750 - discount 300 = 450

15000 + 450 =15450

Isabella buys the inventory so they have to pay so its account payable is payable amount so its debit and cash will goes out from the company so its will be credit

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