X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it purchased $400 of merchandise on account with terms of 2/15, n/40. On May 3, X-Mart returned $50 of merchandise due to defect. Assuming that the purchase was paid for within the discount period, demonstrate the required journal entry for X-Mart to record the payment

The journal entry is shown below:

Account payable A/c Dr $350

To Cash A/c Dr $343

To Merchandise inventory A/c $7

(Being the amount is paid)

The computation is shown below:

Account payable = Purchase of inventory amount - returned goods

= $400 - $50

= $350

Cash Account = Account payable * discount rate

= $350 * 2%

= $7

And, the remaining amount will be credited to the cash account