The entry to record returned merchandise to Vine Company is:
A) debit Merchandise Inventory; credit Accounts Receivable in the general ledger.
B) debit Accounts Payable; credit Supplies.
C) debit Accounts Payable/Vine Company in the accounts payable subsidiary ledger and debit Accounts Payable in the general ledger; credit Merchandise Inventory.
D) debit Merchandise Inventory; credit Accounts Payable.

Question

Quizplus · Accepted Answer

When merchandise is returned to a supplier, the company must reverse the effects of the original purchase. This involves decreasing the Accounts Payable account (since the company now owes less to the supplier) and decreasing the Merchandise Inventory account (since the company no longer has the merchandise). Choice C correctly reflects this by debiting Accounts Payable (to decrease the liability) and crediting Merchandise Inventory (to decrease the asset). The mention of both the general ledger and the subsidiary ledger ensures that the entry is recorded in detail (specific supplier in the subsidiary ledger) and in summary form (total Accounts Payable in the general ledger).

The Entry to Record Returned Merchandise to Vine Company Is