Using the gross method,record the payment of the following transaction in time to take the discount.Clip Company bought $7,000 of merchandise,terms 1/15,n/45.The company uses the voucher system and the periodic inventory method.
A)debit Cash $7,000;credit Vouchers Payable $7,000.
B)debit Vouchers Payable $7,000;credit Cash $6,930;credit Purchases Discount $70.
C)debit Vouchers Payable $6,930;credit Cash $6,930.
D)debit Vouchers Payable $7,000;credit Cash $7,000.

Question

Quizplus · Accepted Answer

The gross method means that purchases are recorded at the full invoice amount, without taking any discounts. Therefore, we will initially record the purchase of $7,000 by debiting Purchases and crediting Vouchers Payable. When the payment is made within the discount period, we will debit Vouchers Payable for the full amount of $7,000 and credit Cash for the discounted amount of $6,930. We will also credit Purchases Discount for the discount amount of $70. Therefore, B is the correct answer.

Using the Gross Method,record the Payment of the Following Transaction