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A company purchased $3,500 of merchandise on July 5 with terms 3/10, n/30. On July 7, it returned $700 worth of merchandise. On July 12, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, the correct journal entry to record the payment on July 12 is:

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Answer and Explanation:

The Journal entry is shown below:-

Accounts payable Dr, $2,800 ($3,500 - $700)

         To Merchandise inventory $84 ($2,800 × 0.03)

         To Cash $2,716 ($2,800 × (1 - 0.03)

(being the payment is recorded)

Here we debited the accounts payable as it decreased the liabilities and we credited the merchandise inventory and cash as it also decline the assets

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