Harder Corporation uses the perpetual inventory method.On March 1, it purchased $30,000 of inventory, terms 2/10, n/30.On March 3, Harder returned goods that cost $3,000.On March 9, Harder paid the supplier.On March 9, Harder should credit
A)purchase discounts for $600.
B)inventory for $600.
C)purchase discounts for $540.
D)inventory for $540.

Question

Quizplus · Accepted Answer

The terms of 2/10, n/30 indicate that the supplier offers a 2% discount if paid within 10 days, otherwise the full amount is due within 30 days. Harder returned $3,000 worth of inventory, which reduces the amount owed to $27,000 ($30,000 - $3,000). Harder paid the supplier on March 9, which is within the discount period of 10 days, so Harder can take advantage of the 2% discount. The amount of the discount is $540 ($27,000 x 0.02). Therefore, to properly record the transaction, Harder should credit inventory for the full purchase amount of $30,000 and credit purchase discounts for $540. This will result in a net cost of $29,460 for the inventory purchased. Therefore, the correct answer is D.

Harder Corporation Uses the Perpetual Inventory Method