Company B Purchased Merchandise Inventory With An Invoice Price Of $15,000 And Credit Terms Of 2/10, N/30. What Is The Net Cost Of The Goods If Company B Pays Within The Discount Period?
The correct option of this multiple choice question (mcq) is (c) as proved
below:
We are given the following:
Invoice Price = $15,000
Credit Terms = 2% discount is given by seller to purchaser (company B), if
it paid within 10 days. While total time period to make payment is 30 days
after which the due time period has expired.
Find:
Here, we need to calculate the net cost of goods (NCOG) = ?
NCOG = Invoice Price - Discount
Discount = Invoice Price X 2/100 = $15,000 X
2/100 = $300
So, we get the following:
NCOG = $15,000 - $300 = $14,700
The journal entry related to discount get by the company B when the payment
is made within the discount period is shown below:
For Company B (Purchaser), assuming the company B uses periodic inventory
system
Accounts Payable a/c $15,000
Cash a/c $14,700
Purchase Discount a/c $300
(Payment Made Within Discount Period To Seller)
For Seller, assuming the seller uses periodic inventory system
Cash a/c $14,700
Sales Discount a/c $300
Accounts
Receivable (Company B) a/c $15,000
(Payment Received From Company B Within Discount Period)
If the company B uses perpetual inventory system, then the following
entry is recorded as shown below:
Accounts Payable a/c $15,000
Cash
a/c $14,700
Inventory a/c $300
(Payment Made Within Discount Period And Discount Recorded Under Inventory
Account)
Inventory is recorded with the amount of discount.
If the seller uses perpetual
inventory system, then the following entry is recorded as shown below:
Cash a/c $14,700
Inventory a/c $300
Accounts
Receivable (Company B) a/c $15,000
(Payment Received Within Discount Period And Amount Of Discount Recorded
Under Inventory Account)
The other options (a, b and d) are incorrect choices of this multiple choice question (mcq).
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