On July 22, a company that uses the perpetual inventory system purchased merchandise inventory at a cost of $5,650 with credit terms 2/10, net 30. If the company pays for the purchase on August 1, what would be the appropriate journal entry?

Dr Accounts payable 5,650

Cr Cash 5,537

Cr Purchase discount 113

Explanation:

the journal entry to record the purchase:

July 22, purchase of merchandise on account, credit terms 2/10, net 30

Dr Merchandise inventory 5,650

Cr Accounts payable 5,650

Since the company paid the invoice within the discount term, the journal entry should be:

August 1, invoice paid within discount period

Dr Accounts payable 5,650

Cr Cash 5,537

Cr Purchase discount 113

The credit terms 2/10, net 30, means that if the invoice is paid within 10 days, the sales price will be lowered by 2%, and if the invoice is paid afterwards and before 30 days, the payment must cover the full invoice price.