Citrus CollegeACCT 101

Rolfes Company purchased merchandise on account from Springhill Company for $5,000, terms 2/10, n/30. Rolfes returned merchandise with an invoice amount of $1,000 and received full credit.

a. If Rolfes Company pays the invoice within the discount period, what is the amount of cash required for the payment? If required, round the answer to the nearest dollar.

$

b. What account is debited by Rolfes Company to record the return?

Answer:

a. Amount of cash required for the payment if paid within discount period = $3,920

b. Accounts Payable account is debited by Rolfes Company to record the return

Step-by-step explanation

a. Amount of cash required for the payment if paid within discount period = ($5,000 - $1,000) * 98%

Amount of cash required for the payment if paid within discount period = $4,000 * 98%

Amount of cash required for the payment if paid within discount period = $3,920

b. When the inventory is returned by Rolfes Company, then the amount payable by Rolfes Company shall decrease i.e. Accounts Payable of Rolfes Company shall decrease. Accounts Payable are decreased when they are debited.

So, Accounts Payable account is debited by Rolfes Company to record the return