Question

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

Answer 1

Answer:

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