Merchandise with an Invoice Price of $2,000 Was Purchased on October

question 185

Multiple Choice

Merchandise with an invoice price of $2,000 was purchased on October 3, terms 1/15, n/60. The company uses the net method to record purchases. The entry to record the cash payment of this purchase obligation on October 17 is:

• A) Debit Accounts Payable $1,980; credit Cash $1,980.
• B) Debit Accounts Payable $2,000; credit Cash $2,000.
• C) Debit Accounts Payable $1,980; credit Discounts Lost $20; credit Cash $2,000.
• D) Debit Accounts Payable $2,000; credit Merchandise Inventory $20; credit Cash $1,980.
• E) Debit Accounts Payable $2,000; credit Merchandise Inventory $40; credit Cash $1,960.

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Definitions:

Interest-Rate Cost-Of-Funds

The expense associated with borrowing funds, measured by the interest rate that banks or other financial institutions charge for the use of their money.

Interest-Rate Cost

The cost incurred by an individual or entity due to the interest rate applied on borrowed funds, influencing how much is paid back in interest over the loan period.

One-Time Added Profit

A temporary increase in earnings that a company experiences from a singular event or transaction, not expected to recur in the normal course of business.

Anticipates

The action of foreseeing or preparing for future events or needs.