A company records purchases using the net method.On February 1,they purchased merchandise inventory on account for $7,300 with terms of 1/10,n/30.The February 1 journal entry to record this transaction would include a:
A)Debit to Merchandise Inventory of $7,300.
B)Debit to Merchandise Inventory of $7,227.
C)Debit to Merchandise Inventory of $73.
D)Credit to Merchandise Inventory of $73.
E)Credit to Accounts Payable of $7,300.

Question

Quizplus · Accepted Answer

The net method records purchases at their net amount, which is the purchase price minus any discounts. The terms are 1/10, n/30 which means that the company can receive a 1% discount if they pay within 10 days, otherwise the full amount is due within 30 days. To calculate the net amount, we subtract the discount from the purchase price: $7,300 - ($7,300 x 0.01) = $7,227. Therefore, the journal entry to record this transaction would include a debit to Merchandise Inventory of $7,227.

A Company Records Purchases Using the Net Method