A Company That Uses the Gross Method of Accounting for Purchases

question 19

Multiple Choice

A company that uses the gross method of accounting for purchases and a perpetual inventory system made a February 1 purchase of merchandise inventory on account for $7,300 with terms of 1/10, n/30. The February 1 journal entry to record this transaction would include a:

• A)Debit to Merchandise Inventory of $7,300.
• B)Debit to Merchandise Inventory of $7,227.
• C)Credit to Cash of $7,300.
• D)Credit to Merchandise Inventory of $73.
• E)Credit to Accounts Payable of $7,227.

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Definitions:

Incurred Costs

Costs that have been realized or expended in the course of business operations.

Actuator

A device that produces mechanical motion in response to an electrical, air, or hydraulic signal.

Pilot Operated

A system or valve controlled indirectly through the use of a smaller, pilot valve rather than directly by mechanical means.

Flow Control

The regulation and management of the rate or volume of flow in a system, such as fluids in pipelines or data over networks, to meet certain conditions or requirements.