A Company Using the Perpetual Inventory System Purchased Inventory Worth

question 121

Multiple Choice

A company using the perpetual inventory system purchased inventory worth $500,000 on account with terms of credit being 3/15,n/45.Defective inventory of $50,000 was returned 2 days later and the accounts were appropriately adjusted.If the company paid the invoice 25 days later,the journal entry to record the payment would be ________.

• A)$500,000 debit to Accounts Payable and $500,000 credit to Cash
• B)$450,000 debit to Accounts Payable and $450,000 credit to Cash
• C)$500,000 debit to Accounts Payable,$486,500 credit to Cash,and $13,500 credit to Inventory
• D)$486,500 debit to Accounts Payable,$13,500 credit to Inventory,and $450,000 credit to Cash

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Definitions:

Sales Discounts

Reductions granted from the listed price of goods or services, often used as a marketing strategy to encourage early payment or increase sales volume.

2/10, N/30

A payment term indicating that a buyer can take a 2% discount on the invoice amount if payment is made within 10 days; otherwise, the net amount is due in 30 days.

Sales Return

goods returned by the customers to the seller after the sale, reducing the gross sales figure.

Gross Profit

The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.