A supplier offers a company terms 3/10, n/30 for a $10,000 purchase on account on January 1. The company uses a perpetual inventory system to record transactions. If the company makes the payment on January 10, the entry to record the payment will include a:

The entry to record the payment:

Debit Accounts Payable $10,000

Credit Purchase discount $300

Credit Cash $9,700

Explanation:

Credit terms of 3/10, n/30 means that 3% discount for the payment within 10 days and the full amount to be paid within 30 days.

On January 1, the company purchase inventory:

Debit Inventory $10,000

Credit Accounts Payable $10,000

The company makes the payment on January 10 and takes the appropriate discount:

3% x $10,000 = $300

The entry to record the payment:

Debit Accounts Payable $10,000

Credit Purchase discount $300

Credit Cash $9,700

answer; i believe the correct answer is (a) purchase of treasury stock;