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19 July, 19:08

On August 1, Grayson Company bought goods with a list price of $4,800, terms 2/10, n/30. The firm records purchases at invoice price using the perpetual inventory system. On August 5, Grayson returned goods with a list price of $600 for credit. If Grayson paid the supplier the amount due on August 9, the appropriate entry would be: (A). Accounts Payable 4,200Inventory 84Cash 4,116 (B) Accounts Payable 4,800Inventory 96Cash 4,704 (C) Accounts Payable 4,116Cash 4,116 (D) Accounts Payable 4,200Cash 4,200

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  1. 19 July, 23:03
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    The correct answer is A

    Explanation:

    The journal entry for the following is as follows:

    August 9 Accounts Payable A/c ... Dr $4,200

    Inventory A/c ... Dr $84

    To Cash A/c ... Cr $4,116

    Working Note:

    On August 5, the amount of $600 goods returns from customer, so the remaining balance is

    = $4,800 - $600

    = $4,200

    On the remaining balance, the discount which is evaluated as the payment is received within the discount period which is August 9. So,

    = $4,200 x (100% - 2%)

    = $ 4,200 x 98%

    = $ 4,116

    Discount = Amount - Payment amount

    = $4,200 - $4,116

    = $84
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