A company that uses the net method of recording purchases made a purchase of $400 with terms of 2/10,n/30.The entry to record the purchase would be:
A)Debit Merchandise Inventory $392;credit Accounts Payable $392.
B)Debit Merchandise Inventory $400;credit Discounts Lost $8;credit Accounts Payable $392.
C)Debit Merchandise Inventory $392;credit Cash for $392.
D)Debit Merchandise Inventory $392;debit Discounts Lost $8;credit Accounts Payable $400.
E)Debit Accounts Payable $400;credit Discounts Lost $8;credit Cash $392.

Question

Quizplus · Accepted Answer

The net method of recording purchases means that the purchase is recorded at the net amount, which is the invoice price minus any discounts. In this case, the invoice price is $400 and the discount is 2%, so the net amount is $392. The entry to record the purchase would therefore be:Debit Merchandise Inventory $392Credit Accounts Payable $392

A Company That Uses the Net Method of Recording Purchases