Answer:
There are two methods to record purchases in the perpetual inventory system. The net method is another means of recording purchases which initially records the invoice at it net amount of any cash discount giving management an advantage in controlling and monitoring cash payments.
Perpetual Inventory System
Gross Method
(a) Purchased the merchandise.
Merchandise Inventory $ 4700 Dr.
Accounts Payable $ 4700 Cr.
Terms FOB shipping point, 1/10, n/30
(b) Recorded receipt of the credit memo for merchandise returned.
Accounts Payable $ 1600 Dr.
Merchandise Inventory $ 1600 Cr.
(c) Paid the amount owed within the discount period.
Accounts Payable $ 3100 Dr
Discount $ 31 Cr
Cash $ 3069 Cr
Perpetual Inventory System
Net Method
(a) Purchased the merchandise.
Merchandise Inventory $ 4700 Dr.
Accounts Payable $ 4700 Cr.
Terms FOB shipping point, 1/10, n/30
(b) Recorded receipt of the credit memo for merchandise returned.
Accounts Payable $ 1600 Dr.
Merchandise Inventory $ 1600 Cr.
(c) Paid the amount owed within the discount period.
Accounts Payable $ 3100 Dr
Cash $ 3100 Cr
