Purchase-related transactions

Question

The Stationery Company purchased merchandise on account from a supplier for $14,500, terms 2/10, n/30. The Stationery Company returned merchandise with an invoice amount of $3,500 and received full credit.

a. If The Stationery Company pays the invoice within the discount period, what is the amount of cash required for the payment?
fill in the blank 1 of 1$

b. Under a perpetual inventory system, what account is credited by The Stationery Company to record the return?

Answer 1

To calculate the cash required for payment after the purchase and return, we can follow these steps:

a. Cash required for the payment

1. Calculate the initial purchase amount:
   The initial purchase amount is $14,500.

2. Subtract the return amount:
   The return amount is $3,500.
   Adjusted purchase amount = $14,500 - $3,500 = $11,000.

3. Calculate the discount for early payment:
   The discount is 2% of the adjusted purchase amount (if paid within the discount period).
   Discount = 2% of $11,000 = 0.02 × $11,000 = $220.

4. Calculate the cash required for the payment:
   Cash required = Adjusted purchase amount - Discount
   Cash required = $11,000 - $220 = $10,780.

Answer for part a:

$10,780

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b. Account credited for the return under a perpetual inventory system

Under a perpetual inventory system, when merchandise is returned, the company needs to reduce its inventory balance. The account that is credited to record the return is called Inventory.

Answer for part b:

Inventory