Using the gross method approach,record the payment of the following transaction in time to take the discount.Clip Company bought $6,500 of merchandise,terms 2/15,n/45:
A)debit Cash $6,500; credit Vouchers Payable $6,500.
B)debit Vouchers Payable $6,500; credit Cash $6,370; credit Purchases Discount $130.
C)debit Vouchers Payable $6,370; credit Cash $6,370.
D)debit Vouchers Payable $6,500; credit Cash $6,500.

Question

Quizplus · Accepted Answer

The gross method approach involves recording the purchase at the full invoice amount and then accounting for any discount taken at the time of payment.

So, initially, we would record the purchase as:

Debit Purchases $6,500
Credit Accounts Payable $6,500

Then, when we make the payment within the discount period, we would record:

Debit Accounts Payable $6,500
Credit Cash $6,370
Credit Purchases Discount $130

This reflects the discount taken of 2% (or $130) off the original purchase price of $6,500.

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