Homework Help is Here – Start Your Trial Now!
Business
Accounting
On September 12, Ryan Company sold merchandise in the amount of $6,800 to Johnson Company, with credit terms of 2/10, n/30. The cost of the items old is $4,500. Johnson uses the perpetual inventory system and the net method of accounting for purchases. Johnson pays the invoice on September 8, and takes the appropriate discount. The journal entry that Johnson makes on September 18 is: Multiple Choice Account Title Accounts Payable Merchandise Inventory Cash Account Title Cash Discounts Lost Accounts Payable Account Title Accounts Payable Merchandise Inventory Cash Debit 4,500 Debit 6,664 136 Debit 6,800 Credit 98 4,410 Credit 6,800 Credit 136 6,664

On September 12, Ryan Company sold merchandise in the amount of $6,800 to Johnson Company, with credit terms of 2/10, n/30. The cost of the items old is $4,500. Johnson uses the perpetual inventory system and the net method of accounting for purchases. Johnson pays the invoice on September 8, and takes the appropriate discount. The journal entry that Johnson makes on September 18 is: Multiple Choice Account Title Accounts Payable Merchandise Inventory Cash Account Title Cash Discounts Lost Accounts Payable Account Title Accounts Payable Merchandise Inventory Cash Debit 4,500 Debit 6,664 136 Debit 6,800 Credit 98 4,410 Credit 6,800 Credit 136 6,664

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

1:54 On September 12, Ryan Company sold merchandise in the amount of $6,800 to Johnson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Johnson uses the perpetual inventory system and the net method of accounting for purchases. Johnson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Johnson makes on September 18 is: Multiple Choice O O Account Title Accounts Payable Merchandise Inventory Cash Account Title Cash Discounts Lost Accounts Payable Account Title Accounts Payable Merchandise Inventory Cash Debit 4,500 Debit 6,664 136 Credit 90 4,410 Credit 6,800 Debit Credit 6,800 136 6,664

**Accounting for Purchase Transactions Using Net Method** On September 12, Ryan Company sold merchandise in the amount of $6,800 to Johnson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Johnson uses the perpetual inventory system and the net method of accounting for purchases. Johnson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Johnson makes on September 18 is: **Multiple Choice:** **Option A:** | Account Title | Debit | Credit | |---------------------------|-------|---------| | Accounts Payable | | 4,500 | | Merchandise Inventory | 98 | | | Cash | 4,410 | | **Option B:** | Account Title | Debit | Credit | |---------------------------|-------|---------| | Cash | 6,664 | | | Discounts Lost | 136 | | | Accounts Payable | | 6,800 | **Option C:** | Account Title | Debit | Credit | |---------------------------|-------|---------| | Accounts Payable | 6,800 | | | Merchandise Inventory | | 136 | | Cash | | 6,664 | **Explanation of Figures:** - **Option A:** Indicates an accounts payable credit of $4,500, debit to merchandise inventory of $98, and debit to cash of $4,410. This does not accurately reflect the discount and total payment. - **Option B:** Indicates a debit to cash of $6,664, debit to discounts lost of $136, and credit to accounts payable of $6,800. This suggests no discount was taken by treating it as a loss. - **Option C:** Indicates a debit to accounts payable of $6,800, credit to merchandise inventory of $136, and credit to cash of $6,664. This correctly accounts for the discount of 2% on the $6,800 purchase, totalling $136, and the correct cash payment of $6,664. Thus, the correct journal entry for the transaction on September 18, using the net method, is reflected in **Option C**.
Transcribed Image Text:**Accounting for Purchase Transactions Using Net Method** On September 12, Ryan Company sold merchandise in the amount of $6,800 to Johnson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Johnson uses the perpetual inventory system and the net method of accounting for purchases. Johnson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Johnson makes on September 18 is: **Multiple Choice:** **Option A:** | Account Title | Debit | Credit | |---------------------------|-------|---------| | Accounts Payable | | 4,500 | | Merchandise Inventory | 98 | | | Cash | 4,410 | | **Option B:** | Account Title | Debit | Credit | |---------------------------|-------|---------| | Cash | 6,664 | | | Discounts Lost | 136 | | | Accounts Payable | | 6,800 | **Option C:** | Account Title | Debit | Credit | |---------------------------|-------|---------| | Accounts Payable | 6,800 | | | Merchandise Inventory | | 136 | | Cash | | 6,664 | **Explanation of Figures:** - **Option A:** Indicates an accounts payable credit of $4,500, debit to merchandise inventory of $98, and debit to cash of $4,410. This does not accurately reflect the discount and total payment. - **Option B:** Indicates a debit to cash of $6,664, debit to discounts lost of $136, and credit to accounts payable of $6,800. This suggests no discount was taken by treating it as a loss. - **Option C:** Indicates a debit to accounts payable of $6,800, credit to merchandise inventory of $136, and credit to cash of $6,664. This correctly accounts for the discount of 2% on the $6,800 purchase, totalling $136, and the correct cash payment of $6,664. Thus, the correct journal entry for the transaction on September 18, using the net method, is reflected in **Option C**.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Accounting for discounts
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS