Merchandise with an invoice price of $2,500 was purchased on February 3, terms 3
ID: 2561839 • Letter: M
Question
Merchandise with an invoice price of $2,500 was purchased on February 3, terms 3/15, n/60. The company uses the net method to record purchases. The entry to record the cash payment of this purchase obligation on February 17 is:
a) Debit Accounts Payable $2,425; debit Discounts Lost $75; credit Cash $2,500.
b) Debit Accounts Payable $2,500; credit Cash $2,500.
c) Debit Accounts Payable $2,425; credit Cash $2,425.
d) Debit Accounts Payable $2,500; credit Discounts Lost $225; credit Cash $2,275.
e) Debit Accounts Payable $2,500; credit Merchandise Inventory $75; credit Cash $2,425
Explanation / Answer
the payment is made within the discount period,hence following entry will be made Accounting titles & Explanations Debit Credit Accounts payable 2425 cash (2500*97%) 2,425 hence option C is the correct answer