Jay Co Sold Merchandise With A List Price Of $6,000 On Account. The Merchandise Cost Jay $3.200 And Was Sold With Payment Terms Of 2/10, 1/30. Recording This Transaction Increases Accounts Receivable By____.

The correct option of this multiple choice question (mcq) is (c) as list price is the price at which merchandise or goods can be sold to retailers if no discount, such as trade discount, is given. If the trade discount is given, then it is deducted from the list price which becomes selling price for Jay Co (seller’s business), which decrease its profit margin in selling goods, and purchase price for buyer’s business.

The journal entries of this business transaction can be recorded under perpetual inventory system and periodic inventory system as shown below:

Under Perpetual Inventory System

Accounts Receivable a/c $6,000

                                     Sales a/c $6,000

(Sold Merchandise For $6000 On Account / Credit)

Cos of Goods Sold a/c $3,200

                              Inventory a/c $3,200

(To Update Inventory)

Under Periodic Inventory System

Accounts Receivable a/c $6,000

                                     Sales a/c $6,000

(Sold Goods Or Merchandise For $6000 On Account)

If the buyer made the payment within the discount period, then we debit cash account, and inventory account (with the amount of discount) and credit accounts receivable account under perpetual inventory system in the books of account of seller (Jay Co). Under periodic inventory system, we debit cash account, and sales discount and credit accounts receivable.

If the payment is received after the discount period, we debit cash account and credit accounts receivable account under both perpetual and periodic inventory systems.

From the point view of buyer’s business, we debit accounts payable account and credit cash account, and credit inventory account perpetual inventory system if the payment made within discount period. Under periodic inventory system, we debit accounts payable account and credit cash account, and purchases discount account.

If the payment is made after discount period, then we debit accounts payable account and credit cash account under both perpetual and periodic inventory systems.

The other options are wrong choices here.