Question

On December 7, Lancaster Company purchased merchandise inventory with an invoice price of 12,000 and credit terms of 2/10, n/30 from Singing River Inc. On December 12, Singing River granted a2,000 allowance because some of the goods did not meet product specifications. Lancaster paid the account in full on December 16. In the tabular analysis that follows, the purchase is recorded as:

Answer 1

The purchase of merchandise inventory with an invoice price of $12,000 and credit terms of 2/10, n/30 from Singing River Inc. is recorded by debiting Merchandise Inventory and crediting Accounts Payable.

Step-by-step explanation:

The purchase of merchandise inventory with an invoice price of $12,000 and credit terms of 2/10, n/30 from Singing River Inc. is recorded as follows:

1. Initial purchase:

• Debit Merchandise Inventory for $12,000
• Credit Accounts Payable for $12,000

Allowance granted:

• Debit Accounts Payable by $2,000
• Credit Merchandise Inventory by $2,000

Payment in full:

• Debit Accounts Payable for $10,000
• Debit Cash for $10,000