A company purchased $1,800 of merchandise on July 5 with terms 2/10,n/30.On July 7,it returned $200 worth of merchandise.On July 28,it paid the full amount due.Assuming the company uses a perpetual inventory system,and records purchases using the gross method,the correct journal entry to record the merchandise return on July 7 is:
A)Debit Merchandise Inventory $1,600; credit Cash $1,600.
B)Debit Merchandise Inventory $200; credit Accounts Payable $200.
C)Debit Merchandise Inventory $200; credit Sales Returns $200.
D)Debit Accounts Payable $200; credit Merchandise Inventory $200.
E)Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600.

Question

Quizplus · Accepted Answer

The correct journal entry for returning merchandise under a perpetual inventory system using the gross method is to debit Accounts Payable and credit Merchandise Inventory. This reflects the reduction in the liability to the supplier (Accounts Payable) and the corresponding decrease in inventory due to the return.

A Company Purchased $1,800 of Merchandise on July 5 with Terms