Question

On August 1, Grayson Company bought goods with a list price of $4,800, terms 2/10, n/30. The firm records purchases at invoice price using the perpetual inventory system. On August 5, Grayson returned goods with a list price of $600 for credit. If Grayson paid the supplier the amount due on August 9, the appropriate entry would be:

Answer 1

Answer:

Dr Accounts payable $4,200

Cr Inventory account $ 84

Cr Cash account $ 4,116

Explanation:

Value of goods purchased = $4,800

Goods returned for credit = $600

Accounts payable = Value of goods purchased - Goods return for credit

= $4,800 - $600

= $4,200

Since payment was made before the due date, Grayson company is thus entitled to 2% discount.

Inventory = Accounts payable× discount

= $4,200 × 0.02

= $84

Cash is therefore;

= $4,200 - $84

= $4,116