Question

FBS Corporation uses the perpetual inventory method and the gross method for recording purchases on account. On May 11, it purchased $44,000 of inventory, terms 2/10, n/30. On May 13, FBS returned goods that cost $4,000. On May 19, FBS paid the supplier. On May 19, the company should credit

A.purchase discounts for $880.
B.inventory for $880.
C.purchase discounts for $800.
D.inventory for $800.

Answer 1

The correct answer is D

Step-by-step explanation:

The journal entry are as follows:

On May 11

Inventory A/c.....................................Dr $44,000

Accounts Payable A/c................Cr $44,000

Being purchased inventory worth $44,000

On May 13

Inventory A/c..................................................Dr $4,000

Purchase Return A/c..........................................Cr $4,000

Being inventory worth $4,000 returned

On May 19

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

Inventory A/c..........................................Cr $800

Being payment made to supplier

Working Note:

Payment amount = (Inventory purchased value - purchase return) × Discount

=($44,000 - $4,000) × 2%

= $40,000 × 2%

= $800