Purchases were made on account on August 5th in the amount of $100,000 with terms of 1/10, n/30. The bill was paid on August 14th. In a perpetual inventory system the journal entry to record the payment would include

                                               Dr.            Cr.

Account Payable               $100,000

Cash Discount Received                      $1,000

Cash                                                       $99,000

Explanation:

Purchase Amount = $100,000

Terms of 1/10, n/30 means that there is 1% discount available on the payment of purchases made within 10 days after purchase. The payment has bee made within the discount period so payment are entitled to claim the discount.

Discount = $100,00 x 1% = $1,000

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