Question

X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it purchased $400 of merchandise on account with terms of 2/15, n/40. On May 3, X-Mart returned $50 of merchandise due to defect. Assuming that the purchase was paid for within the discount period, demonstrate the required journal entry for X-Mart to record the payment by selecting all of the correct actions below.
A. Credit Purchase Discounts $7.
B. Credit Cash $392.
C. Credit Merchandise Inventory $7.
D. Debit Accounts Payable $350.
E. Credit Cash $343.
F. Debit Merchandise Inventory $7.
G. Credit Accounts Payable $350.

Answer 1

Answer:

C. Credit Merchandise Inventory $7

D. Debit Accounts Payable $350

E. Credit Cash $343

Explanation:

Based on the information given we were told the company made purchased of the amount of $400 of merchandise which include a terms of 2/15, n/40 and On May 3 the company returned the amount of $50 of merchandise due to defect which means that if the purchase was been paid for within the discount period the correct required journal entry for X-Mart to record the payment will be :

Credit Merchandise Inventory $7

[(2%*400)-(2%-50)]

=$8-$1

=$7

Debit Accounts Payable $350

($400-$50)

=$350

Credit Cash $343

($400-$50)-[(2%*400)-(2%-50)]

=$350-($8-$1)

=$350-$7

=$343