On July 10,a hardware retailer purchased merchandise inventory on account for $1,700.The company plans to pay $900 the following week and the remaining amount the week after.Which of the following is the correct entry to record this transaction in a purchases journal? Assume a perpetual inventory system is used.
A)$850 will be recorded in the Accounts Payable CR and Merchandise Inventory CR column.
B)$2,600 will be recorded in the Accounts Payable DR and Merchandise Inventory DR column.
C)$1,700 will be recorded in the Merchandise Inventory CR and Accounts Payable DR column.
D)$1,700 will be recorded in the Accounts Payable CR and Merchandise Inventory DR column.

Question

Quizplus · Accepted Answer

Since the company purchased merchandise inventory on account, the Accounts Payable account should be credited. The amount of the purchase was $1,700, therefore, it should be recorded in the Accounts Payable CR column. On the other hand, since the company acquired merchandise, it should be debited to the Merchandise Inventory account. Therefore, $1,700 should be recorded in the Merchandise Inventory DR column. The fact that the payment will be made in two different weeks does not affect the initial recording of the transaction.

On July 10,a Hardware Retailer Purchased Merchandise Inventory on Account