A purchase on account with an invoice price of $1,500 has been made. The entry to record the payment after the 2 percent discount period would include a(n)
decrease to Accounts Payable for $1,500.
The entry to record payment after the 2 percent discount period for the purchase on account with an invoice price of $1,500 would be as follows:
Accounts Payable – $1,500
Cash – $1,470
Purchase Discount – $30
Explanation:
When a purchase is made on account, the accounts payable account is credited for the amount of the purchase. After the payment is made, the accounts payable account is debited for the amount paid. In this case, the accounts payable account is debited for $1,500.
The payment made after the 2 percent discount period is $1,470 ($1,500 – $30 discount). The cash account is credited with the amount paid. In this case, the cash account is credited for $1,470.
The purchase discount account is also credited for the amount of the discount given, which is $30 (2% of $1,500). The purchase discount account is a contra expense account that reduces the expense of the purchase.
Therefore, the entry to record the payment after the 2 percent discount period would include a debit to Accounts Payable for $1,500, a credit to Cash for $1,470, and a credit to Purchase Discount for $30.
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