Day Company Purchased $3,000 of Merchandise on Credit, Terms 3/15

question 108

Multiple Choice

Day Company purchased $3,000 of merchandise on credit, terms 3/15 n/30. The entry to record payment for the merchandise within the discount period under a perpetual inventory system would include a:

• A)debit to Inventory of $1,940.
• B)debit to Accounts Payable of $1,940.
• C)credit to Purchase Discounts of $90.
• D)credit to Inventory of $90.

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Definitions:

Stockholders' Equity

Represents the owners' residual interest in the assets of a corporation after deducting liabilities, often detailed in the equity section of the balance sheet.

Capital Surplus

Excess amount received by a company over the par value of its stock, reflected in the shareholders' equity section of the balance sheet.

Retained Earnings

The portion of a company's profit that is held or retained and not paid out as dividends to shareholders, often used for reinvestment in the business or to pay off debt.

Paid-In Capital

The total amount of money that shareholders have invested in the company by purchasing shares directly from the company.