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Hallo,
In the following example, why do we debit inventory only with a 40:
On May 1, Ace Bonding Company purchased inventory costing $2,000 on account with terms 2/10, n/30. On May 8, Ace pays for this inventory and records which of the following using a perpetual inventory system?
Accounts Payable 2,000 (is this a Cr?)
Inventory 40/Cash 1,960 (is this Dr Inv?)
Purchase discount = $2,000 × 2% = $40.Thank you!
Where are you finding these examples?
This question can not possibly be asked in Paper F3.The answer makes no sense either.
It should be CR payables 2000 DR inventory 2,000 (when the goods are bought)
Dr payables 1960 CR cash 1960 when the invoice is paid.
Dr Payables 50 CR discounts received 40 (to clear the discount).
(Some people prefer to reduce the cost of inventory by the discount. However in Paper F3 we do not – we do what I have written above.)
I am using different materials, maybe some are not official, just to make sure I have more examples done for the exam.
Thank you!
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