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:

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15 February, 07:07

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:

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June Shepard · Answer 1

Dr Accounts Payable $800

Cr Merchandise Inventory $16

Cr Cash $784

Explanation:

The reason is that the term is that the discount given is 2% within the time allowed. So if the company has paid with in the time period then it must be recorded as increase in the accounts payable (Credit) with the $800 when the inventory was received which will increase the inventory (Debit) as well. So the entry would be:

Dr Merchandise Inventory $800

Cr Accounts Payable $800

The inventory return worth of $200, will not be recorded as upon inspection the inventory is returned back to the supplier.

And when the cash is paid the entry would include the discount received which is credit in nature by 2% of $800, decrease in payables by $800 and cash by 98% of $800 as 2% percent is discount. So the entry would be:

Dr Accounts Payable $800

Cr Merchandise Inventory 2% $16

Cr Cash 98% $784