Q1: A company using the gross method of accounting for purchases and a perpetual inventory system recorded the following entry:

Accounts Payable	2,500
Merchandise inventory		50
Cash		2,450

This entry reflects a: a. purchase of merchandise on credit b. return of merchandise c. sale of merchandise on credit d. payment of the account payable less a 2% cash discount taken. e. payment of the account payable less a 1% cash discount taken.

Q2: A company using the gross method of recording purchases and a perpetual inventory system failed to take advantage of a discount available. When it pays the amount of the invoice at the end of the credit period, the journal entry will include a debit to: a. merchandise inventory. b. sales discounts. c. accounts payable. d. cash. e. purchase discounts.