A company that uses the net method of recording purchases and a perpetual inventory system 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 28, it paid the full amount due. The correct journal entry to record the payment on July 28 is:
A. Debit Accounts Payable $1,600; credit Merchandise Inventory $32; credit Cash $1,568.
B. Debit Merchandise Inventory $1,600; credit Cash $1,600.
C. Debit Accounts Payable $1,800; credit Cash $1,800.
D. Debit Cash $1,600; credit Accounts Payable $1,600.
E. Debit Accounts Payable $1,568; debit Discounts Lost $32; credit Cash $1,600.
Answer: E
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