On May 1, Ace Bonding Company purchased inventory costing $2,000 on account with terms 2/10, n/30. On May 8, Ace pays for this inventory and records which of the following using a periodic inventory system?

1. Accounts Payable 2,000

Cash 2,000

2. Accounts Payable 1,960

Purchase Discounts 40

Cash 2,000

3. Accounts Payable 2,000

Purchase Discounts 40

Cash 1,960

4. Cash 2,000

Accounts Payable 2,000

A) Option 1

B) Option 2

C) Option 3

D) Option 4,

Answer: C