Question

Emma Co. sold to Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for $9,200. Emma Co. prepaid the $840 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make to record the payment for the merchandise if Isabella Co. pays within the discount period?

A. Accounts Payable-Emma Co. $15,000
Freight In $750
Cash $14,250
B. Accounts Payable-Emma Co. $15,750
Merchandise Inventory $300
Cash $16,050
C. Accounts Payable-Emma Co. $15,750
Merchandise Inventory $300
Cash $15,450
D. Accounts Payable-Emma Co. $15,000
Freight In $750
Cash $15,750

Answer 1

Dr Accounts Payable-Emma Co. $10,040

Cr Merchandise Inventory $184

Cr Cash $9,856

Step-by-step explanation:

The Journal entry that Isabella Co. will make to record the payment for the merchandise if Isabella Co. pays within the discount period.

Dr Accounts payable-emma Co. $10,040

($9,200+$840)

Cr Merchandise inventory $184

(2%*$9,200)

Cr Cash $9,856

($10,040-$184)