Starlight Corporation uses a perpetual inventory system. It purchased $3,000 of merchandise on...
Question:
Starlight Corporation uses a perpetual inventory system. It purchased $3,000 of merchandise on August 2 on account. Credit terms were 1/10, n/30. It returned $250 of the merchandise on August 4. On August 12, it pays the supplier. Which of the following is part of the journal entry Starlight records when it pays the supplier?
a. Credit Inventory for $27.50
b. Credit to Accounts Payable for $2,722.50
c. Debit to Accounts Payable for $3,000
d. Credit to Cash for $2,750
e. Debit to inventory for $3,000
Perpetual Inventory System:
Under the perpetual inventory system, the balance in inventory and cost of goods sold are recorded on a continuous basis. Whenever there is a movement of inventory in the form of sales or purchases, the inventory and the cost of goods sold balance are updated.
Answer and Explanation: 1
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Correct Answer: Option a. Credit Inventory for $27.50.
Explanation:
Step 1:
- Cash paid = (Purchases - Returns) * (1 - Discount rate)
- Cash paid =...
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