On April 12, a company purchased goods worth \$14,000 on account with terms of 2/15 net 30. The company paid its supplier on April 25. In a perpetual system, the journal entry to record the payment on April 25 would include:

• A. A credit to Cash for \$14,000
• B. A credit to Inventory for \$280
• C. A credit to Accounts Payable for \$14,000
• D. A debit to Cash for \$13,720

Answer: (B)

Verified step by step guidance

1. Identify the purchase terms: The terms 2/15, net 30 mean that the company can take a 2% discount if the payment is made within 15 days; otherwise, the full amount is due in 30 days.
2. Calculate the discount: Since the payment is made on April 25, which is within the 15-day discount period, the company is eligible for a 2% discount on the \$14,000 purchase. Calculate the discount as \$14,000 * 0.02.
3. Determine the amount to be paid: Subtract the discount from the original amount to find the cash payment amount. This is \$14,000 - discount.
4. Record the journal entry: In a perpetual inventory system, the discount is recorded as a reduction in the Inventory account. The journal entry will include a debit to Accounts Payable for \$14,000, a credit to Cash for the amount after discount, and a credit to Inventory for the discount amount.
5. Verify the accounts: Ensure that the total debits equal the total credits in the journal entry to maintain the accounting equation balance.