A Company Records Purchases Using the Net Method

question 92

Multiple Choice

A company records purchases using the net method. On February 1, they purchased merchandise inventory on account for $8,300 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 $8,300.
• B) Debit to Merchandise Inventory of $8,217.
• C) Debit to Merchandise Inventory of $83.
• D) Credit to Merchandise Inventory of $83.
• E) Credit to Accounts Payable of $8,300.

---

Definitions:

Yield to Maturity

The expected overall yield of a bond, assuming it is retained until its maturity date, comprising of both interest earnings and profits from capital appreciation.

Coupon Rate

Yearly interest percentage on a bond, calculated against its nominal value.

At Par

Refers to a financial instrument (e.g., bond or stock) being traded at its face value.

Convertible Bond

A type of corporate bond that can be converted into a pre-specified amount of the issuing company's equity at certain times during its life, usually at the discretion of the bondholder.