A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 12, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, the correct journal entry to record the payment on July 12 is:
A. Debit Accounts Payable $1,600; credit Cash $1,600.
B. Debit Accounts Payable $1,800; credit Cash $1,800.
C. Debit Cash $1,600; credit Accounts Payable $1,600.
D. Debit Merchandise Inventory $1,600; credit Cash $1,600.
E. Debit Accounts Payable $1,600; credit Merchandise Inventory $32; credit Cash $1,568.
Answer: E
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