A company purchases of 200 units of merchandise on credit. The price of the supplier is 60 lei per unit. If the company buys more than 100 units of merchandise, the supplier offers a trade discount of 1.50 lei per unit. The transportation cost incurred amounts at 100 lei. You are asked to choose the correct accounting formula for the transaction:

Merchandise = Cash 11.700 AND Transportation expense = Suppliers 100

Merchandise = Suppliers 11.700 AND Transportation expense = Suppliers 100

Merchandise = Cash 11.800

Merchandise = Suppliers 11.800

D) Merchandise = Suppliers 11,800 is the correct alternative.

Explanation : Under perpetual inventory system, cost of transportation of goods purchased from suppliers is added with Merchandise Inventory and the total cost of merchandise purchase on account [ Cost of material and transportation cost ] credited to supplier or vendor account.

Journal entry for the above mentioned transaction:

Why the rest of the options are not correct?

Originally the transaction made on account so, there will be no involvement of cash and thus Option A and Option C are not hold true.

Option B is also incorrect because it shows a debit in transportation cost . Which is not correct. Transportation cost must have to be added to the merchandise inventory only. There should not be any separate transportation expense account required.