A Company That Uses the Net Method of Recording Purchases

question 230

Multiple Choice

A company that uses the net method of recording purchases and a perpetual inventory system purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. The correct journal entry to record the payment on July 28 is:

• A) Debit Accounts Payable $1,600; credit Merchandise Inventory $32; credit Cash $1,568.
• B) Debit Cash $1,600; credit Accounts Payable $1,600.
• C) Debit Merchandise Inventory $1,600; credit Cash $1,600.
• D) Debit Accounts Payable $1,568; debit Discounts Lost $32; credit Cash $1,600.
• E) Debit Accounts Payable $1,800; credit Cash $1,800.

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Definitions:

Executive Summary

A brief section at the beginning of a document, report, or business plan, summarizing the most important points for quick understanding.

Qualitative and Quantitative

Refers to research or analysis that includes both descriptive (qualitative) and numerical (quantitative) aspects for a comprehensive understanding.

Financial Statement Analysis Report

A document that contains an evaluation of a company's financial performance and health, often using ratios and comparing trends over time.

Long-term Obligations

Long-term obligations refer to debts or financial commitments that are due to be paid after one year, including bonds, mortgages, and long-term loans.