On March 15,2010,Ryan Company Purchased $10,000 of Merchandise on Credit $\quad$

question 42

Multiple Choice

On March 15,2010,Ryan Company purchased $10,000 of merchandise on credit subject to terms of 2/10,n/30.Ryan Company records its purchases using the gross amount.The periodic inventory system is used.Which of the following journal entries is correct when Ryan Company pays for these goods on March 20,2010?

• A) Accounts payable \(\quad \) 9,800
• \(\quad \) Cash \(\quad \) \(\quad \) \(\quad \) \(\quad \) \(\quad \) \(\quad \) 9,800
• B) Accounts payable \(\quad \) 10,000
• \(\quad \) Cash\(\quad \) \(\quad \) \(\quad \) \(\quad \) \(\quad \) \(\quad \) 10,000
• C) Accounts payable \(\quad \) \(\quad \) \(\quad \) 10,000
• \(\quad \) Cash\(\quad \) \(\quad \) \(\quad \) \(\quad \) \(\quad \) \(\quad \) \(\quad \) 9,800
• \(\quad \) Purchase discounts\(\quad \) \(\quad \) \(\quad \) 200
• D) Accounts payable \(\quad 9,800\)
• Purchase discounts \(\quad \) 200
• \(\quad \) Cash\(\quad \) \(\quad \) \(\quad \) \(\quad \) \(\quad \) 10,000

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Definitions:

Excess Purchase Price

The amount by which the purchase price of an asset exceeds its fair market value, often seen in acquisitions where the buyer pays more than the asset's perceived worth.

Investment Income

Income earned from investments, including dividends, interest, or capital gains from securities, real estate, or other holdings.

Acquisition

The process of obtaining control of another corporation, purchasing all or a substantial portion of its assets, or buying its stock.

Common Stock

Shares representing ownership in a corporation, giving holders the right to vote at shareholder meetings and to receive dividends, typically with no predetermined dividend amount.