Yankee Company Uses the Net Method of Recording Purchase Discounts

question 61

Multiple Choice

Yankee Company uses the net method of recording purchase discounts on inventory and the perpetual inventory system. Yankee Company records a payment within the discount period. Which journal entry is prepared?

• A) Debit Accounts Payable and credit Cash for the gross amount of the purchase.
• B) Debit Accounts Payable and credit Cash for the net amount of the purchase.
• C) Debit Accounts Payable, credit Cash and credit Inventory.
• D) Debit Accounts Payable, credit Cash and credit Interest Revenue.

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Definitions:

Shares

Shares represent units of ownership in a company, held by individuals or entities, entitling them to a portion of the corporation's assets and profits.

Public Markets

Platforms or venues where securities, commodities, and other financial instruments are traded openly and are accessible by the general public.

Authorized Shares

The upper limit of shares a corporation can legally distribute, as outlined in its articles of incorporation.

Shareholders

Individuals or entities that legally own one or more shares of stock in a joint-stock company or corporation.