1.On March 15, 2016, Ryan Company purchased $10,000 of merchandise on credit sub

Question

1.On March 15, 2016, Ryan Company purchased $10,000 of merchandise on credit subject to terms of 2/10, n/30. Ryan Company records its purchases using the gross amount. The periodic inventory system is used. Which of the following journal entries is correct when Ryan Company pays for these goods on March 20, 2016? A. Accounts Payable 9,800 Cash 9,800 B. Accounts Payable 10,000 Cash 10,000 C. Accounts Payable 10,000 Cash 9,800 Purchase Discounts 200 D. Accounts Payable 9,800 Purchase Discounts 200 Cash 10,000 2.Which of the following costs is not included as inventory on the balance sheet? A. Raw materials currently being used in the manufacturing process. B. Work in process. C. Finished goods. D. Storage costs for finished goods

Explanation / Answer

correct option is "C"

Purchase discount = 10000*.02 = 200

entry:

Accounts payable debit 10000

purchase discount credit    200

cash credit                          9800

2)correct option is "D"-Storage costs for finished goods (storage cost is not shown as inventory on balancesheet)

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