Supermart purchased merchandise inventory with an invoice price of $5,000 and credit terms of 3/10, n/30. What is the net cost of the goods if Supermart pays within the discount period?

$4,850

Explanation:

If the total invoice price is $5,000 and the company pays within the discount period, then the net price = $5,000 x (1 - 3%) = $4,850

the journal entries should be as follows:

Day 1, merchandise is purchased with 3/10, n/30 terms:

Dr Merchandise inventory 5,000

    Cr Accounts payable 5,000

Day 10, the invoice is paid:

Dr Accounts payable 5,000

    Cr Cash 4,850

    Cr Purchase discounts 150

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