Using the gross method, record the payment of the following transaction in time to take the discount. Connect Company bought $8,000 of merchandise, terms 2/10, n/30, and uses the periodic inventory system.
A) Debit Cash $8,000; credit Vouchers Payable $8,000.
B) Debit Vouchers Payable $8,000; credit Cash $7,840; credit Purchases Discount $160.
C) Debit Vouchers Payable $7,840; credit Cash $7,840.
D) Debit Vouchers Payable $8,000; credit Cash $8,000.

Question

Quizplus · Accepted Answer

The correct entry to record the payment within the discount period under the gross method is to debit Vouchers Payable for the full amount of the invoice ($8,000), credit Cash for the amount paid after taking the discount ($7,840), and credit Purchases Discount for the amount of the discount taken ($160). This reflects the reduction in the payment due to the 2% discount on the $8,000 purchase, which amounts to $160 ($8,000 x 2% = $160), making the actual cash payment $7,840 ($8,000 - $160 = $7,840).

Using the Gross Method, Record the Payment of the Following