Question

A company that uses the perpetual inventory system purchased inventory for $1,000,000 on account with terms of 4/7, n/20. Which of the following correctly records the payment made 15 days after the date of invoice?9)A) Accounts Payable 1,000,000 Cash 1,000,000B) Accounts Payable 1,000,000 Merchandise Inventory 1,000,000C) Accounts Payable 1,000,000 Merchandise Inventory 100,000Cash 900,000D) Cash 1,000,000 Accounts Payable 1,000,000

Answer 1

A) Accounts Payable 1,000,000 Cash 1,000,000

Step-by-step explanation:

Since the term is 4/7, n/20 which means that 4% discount is given if the payment was made within 7 days and the number of credit days is 20

And the payment is made after 15 days which means that the discount part is not applicable

So, the journal entry would be

Accounts Payable A/c Dr $1,000,000

To Cash A/c $1,000,000

(Being the payment is recorded)