Using the gross method, record the payment of the following transaction in time to take the discount. Clip Company bought $15,000 of merchandise, terms 1/15, n/45. The company uses the voucher system and the periodic inventory method.
A) Debit Cash $15,000; credit Vouchers Payable $15,000.
B) Debit Vouchers Payable $15,000; credit Cash $14,850; credit Purchases Discount $150.
C) Debit Vouchers Payable $14,850; credit Cash $14,850.
D) Debit Vouchers Payable $15,000; credit Cash $15,000.

Question

Quizplus · Accepted Answer

The correct answer is B because it reflects the payment within the discount period, taking advantage of the 1% discount on the $15,000 purchase, which amounts to $150. Therefore, $14,850 is paid in cash, and the $150 discount is recorded as a Purchases Discount.

Using the Gross Method, Record the Payment of the Following