On Dec. 7, Toys R Fun purchased $1,000 of merchandise with terms of 2/10,n/30. If payment is made on December 30, demonstrate the required journal entry for Toys R Fun to record the payment under the perpetual inventory system. a.
Debit Cash $1,000; Credit
Accounts Payable $1,000

b.
Debit Accounts Payable
$1,000; credit Cash $980;
credit Merchandise Inventory $20.

c.
Debit Accounts Payable
$1,000; credit Cash $1,000

The answer is B.

Explanation:

The term 2/10,n/30 means Toys R Fun is given a discount of 2 percent if he pays within 10 days and the payable is due in 30 days.

2 percent of $1000 is $20 (2% of $1,000).

The payment is made on the 17th which is the within the discount days.

Dr Accounts Payable $1,000

Cr cash $980

Cr merchandise inventory $20.

But let's assume the payment is not made on that day and it is made on December 30. The entry will be:

Dr Accounts Payable $1,000

Cr cash $1,000