If a company uses the perpetual inventory system and recorded the following entry: Accounts Payable 2,500 Merchandise Inventory 50 Cash 2,450 This entry reflects: Payment of the account payable less a 2% cash discount taken.
Based on the information given assuming the company make use of perpetual inventory the journal entry will reflects a payment of the account payable and recognition of a 2% cash discount taken.
Reason been that the amount of $2,500 represent the account payable payment while the merchandize inventory of $50 is the 2% cash discount that reduce the account payable as 2% of $2,500 will give us $50.
Debit Accounts payable $2,500
Credit Merchandise inventory $50
(2%×$2,500)
Credit Cash $2,450
($2,500-$50)
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