Using the Gross Method,record the Payment of the Following Transaction

question 22

Multiple Choice

Using the gross method,record the payment of the following transaction in time to take the discount.Clip Company bought $7,000 of merchandise,terms 1/15,n/45.The company uses the voucher system and the periodic inventory method.

• A)debit Cash $7,000;credit Vouchers Payable $7,000.
• B)debit Vouchers Payable $7,000;credit Cash $6,930;credit Purchases Discount $70.
• C)debit Vouchers Payable $6,930;credit Cash $6,930.
• D)debit Vouchers Payable $7,000;credit Cash $7,000.

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Definitions:

2 ½ Years

A time period of two and a half years.

Compounded Annually

The process of adding interest to the principal sum of a loan or deposit once per year, resulting in an increase in the amount of interest earned over time.

Discount Rate

The interest rate used to determine the present value of future cash flows.

Promissory Notes

Written promises to pay a specified sum of money to a specified person at a specified time.