Question

Jello's Market purchased $1,000 of goods on account with terms of 2/10,n/30. They returned $200 of the goods due to defect the next day. If Jello pays for the purchase within the discount period and uses the perpetual inventory system, the required journal entry to record the payment would:_______. a. debit Accounts Payable $800; credit Cash $780; and credit Merchandise Inventory $20.b. debit Accounts Payable $1,000; credit Cash 980; and credit Purchase Discounts $20.c. debit Accounts Payable $800 and credit Cash $800.d. debit Accounts Payable $800; credit Merchandise Inventory $16; and credit Cash $784.

Answer 1

The correct answer is A

Step-by-step explanation:

The journal entry to record the payment is as follows:

Accounts payable A/c....................................Dr $800

Merchandise inventory A/c.....................Cr $16

Cash A/c........................................................Cr $784

Being payment made for the goods purchased

As the goods are purchased, so cash is going out of the business and any decrease in asset is credited. Therefore, the cash account is credited. And the accounts payable are reducing or decreasing by making the payment. So, any decrease in liability is debited. Therefore, accounts payable is debited.

The payment is made within the discounting period, so discount which is allowed is credited by the name of merchandising inventory.

Working Note:

Discount = Amount × Discount %

= ($1,000 - $200) × 2%

= $800 × 2%

= $16