A Company That Uses the Net Method of Recording Purchases

question 248

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

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Definitions:

Dollar Tax Liability

The amount of tax owed to the government, calculated in dollars, based on income, sales, imports, or other taxable activities.

Progressive Tax

A tax system in which the tax rate increases as the taxable amount increases, placing a larger burden on those who have higher earnings.

Average Tax Rate

The proportion of the total taxable income paid in taxes, calculated by dividing the total tax amount by the total income.

Regressive Tax

A tax system where the tax rate decreases as the amount subject to taxation increases, often placing a heavier burden on lower-income individuals.