A Firm That Uses the Perpetual Inventory Method Purchases Inventory

question 124

Multiple Choice

A firm that uses the perpetual inventory method purchases inventory of $1 000 on credit with terms of 2/10, n/30. Defective inventory of $200 is returned 2 days later and the accounts are appropriately adjusted. If the firm paid the vendor within 10 days, which of the following entries would be made to record the payment? All amounts include GST.

• A)$800 debit to Accounts payable and an $800 credit to Cash
• B)$14.55 debit to Inventory, a $1.45 debit to GST Clearing, an $800 debit to Accounts payable and an $816 credit to Cash
• C)$800 debit to Accounts payable, a $14.55 credit to Inventory, a $1.45 debit to GST Clearing and a $784 credit to Cash
• D)$784 debit to Accounts payable, a $14.55 debit to Inventory, a $1.45 debit to GST Clearing and an $800 credit to Cash

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Definitions:

Confirmation Bias

A cognitive bias that involves favoring information that confirms one's preexisting beliefs or hypotheses.

Satisficing

A decision-making strategy that involves choosing an option that meets a minimum level of satisfaction rather than the optimal solution.

Not-invented-here Bias

A mindset or culture within an organization that undervalues or disregards ideas, products, or solutions simply because they originate from external sources.

Ill-Structured Problem

A problem for which the existing and desired states are unclear and the method of getting to the desired state is unknown.