Question

intext:"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."

Answer 1

August 5 : Purchase

Merchandise Inventory $1,000 (debit)

Accounts Payable $1,000 (credit)

August 14 : Payment

Accounts Payable $1,000 (debit)

Discount Received $20 (credit)

Cash $800 (credit)

Step-by-step explanation:

When ABC Co purchased merchandise entries would be :

Merchandise Inventory $1,000 (debit)

Accounts Payable $1,000 (credit)

When ABC Co subsequently makes payment for the merchandise entries would be :

Note : Payment is made within the cash discount period of 15 days and ABC Co is eligible for the 2 % cash discount on the purchase. Payment is made net of the 2% cash discount.

Accounts Payable $1,000 (debit)

Discount Received $20 (credit)

Cash $800 (credit)