To record purchases on account, Caleigh's Company uses the perpetual inventory method and the gross method. On September 11, it purchased $44,000 of inventory, terms 2/10, n/30. On September 13, the company returned $4,000 worth of goods. On September 19, the supplier was paid by Caleigh's company. What should the company credit on September 19?

The company should credited on the Cash account and the Cash Discount Receipt for the settlement of the inventory with 10 days.

Explanation:

The detailed entry will be:

19th Sep

Dr Account Payable $40,000

Cr Cash $39,200

Cr Cash Discount Receipt $800

(to record payable settlement and the receipt of cash discount)

Working note: As the company paying with 10 days, the supplier will allow a 2% discount on it net inventory purchase (44,000 - 4,000 = $40,000)

Thus, the discount will be 40,000 x 2% = $800 and Cash repayment will be 40,000 x (1-2%) = $39,200.