Question

On September 12, Ryan Company sold merchandise in the amount of $8,400 to Johnson Company, with credit terms of 2/10, n/30. The cost of the items sold is $5,300. Johnson uses the periodic inventory system and the net method of accounting for purchases. The journal entry that Johnson will make on September 12 is: Multiple Choice 8,488 Purchases Accounts payable 8.400 8,232 Purchases Accounts payable

Answer 1

Answer

• Net Method is being used, hence purchase will be recorded NET OF DISCOUNT on the date of purchase.
• Correct Answer = Option #2
  [Debit] Purchases $ 8232 [$ 8400 – 2% discount]
  [Credit] Accounts payable $ 8232
• Note: Merchandise inventory will not be debited because PERIODIC method is in use, not perpetual method.