Locust Company purchased merchandise on account from a supplier for $34,900, terms 1/10, n/30. Locust Company returned $6,400 of the merchandise and received full credit.
a. If Locust Company pays the invoice within the discount period, what is the amount of cash required for the payment?
b. Under a perpetual inventory system, what account is credited by Locust Company to record the return?
Answer:
a. $28,215 {Purchase of $34,900, less return of $6,400, less discount of $285 [($34,900 – $6,400) × 1%]}
b. Merchandise Inventory