The Stationery Company purchased merchandise on account from a supplier for $9,900, terms 1/10, n/30. The Stationery Company returned merchandise with an invoice amount of $1,300 and received full credit. a. If The Stationery 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 The Stationery Company to record the return?

Part A. $8514

Part B. Purchase Return

Explanation:

Part A. The cash required to payment is the inventory purchases after the sales return. And here the inventory purchases after purchase return are:

Purchases after purchase return = $9,900 - $1,300 = $8600

Now the discount available is 1%

So this implies:

Cash required = $8600 * (100-1)% = $8,514

Part B. Now the double entry under perpetual inventory system would be:

Dr Accounts Payables $86

Cr Purchase Return            $86

Section a. $8,514

Section b. Purchase Return

Explanation:

Section a.

To calculate the cash required, we first need to calculate Purchase after purchase return

Purchase on merchandize = $9,900

Returned merchandise = $1,300

Discount = 1 percent

Purchases after purchase return = $9,900 - $1,300 = $8,600

Purchase after purchase return = $8,600

Now let's calculate the Cash required

Which we have as;

Cash required = purchase after purchase return × (100- 1)%

Cash required = $8,600 * (100-1)% = $8,514

=$8,600×99%

=$,8,600

Section b.

Dr Accounts Payables = $86

Cr Purchase Return = $86

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