A Firm That Uses the Perpetual Inventory Method Purchases Inventory

question 19

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 25 days later, 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 $16 credit to Inventory 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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