Question

ABC Co. purchased merchandise on August 5 at a $1,000 invoice price with terms of 2/10,n/30 and paid for the merchandise on August 14. Determine its entry to record this purchase and the subsequent payment under both the gross method and the net method by matching the action on the left with the method on the right. (Assume a perpetual inventory system.)

i. Cash would be credited for $980 on August 14.
ii. Discounts lost would be debited for $20 on August 14.
iii. Merchandise inventory would be debited for $980 on August 5.
iv. Merchandise inventory would be credited for $20 on August 14.

Answer 1

In order:
Both, Neither, Net, Gross methods.

Step-by-step explanation:

Cash would be credited for $980 on August 14.

matches

Choice, Both methods

Discounts lost would be debited for $20 on August 14.

matches

Choice, Neither method

Merchandise inventory would be debited for $980 on August 5.

matches

Choice, Net method

Merchandise inventory would be credited for $20 on August 14.

matches

Choice, Gross method