Wexim Toys purchased merchandise from a supplier on credit, terms 2/10, n/30 for $9,300. Three days later, the company returned $1,100 of the merchandise. When recording the return transaction, the company would record:

Question

Quizplus · Accepted Answer

When returning merchandise purchased on credit, the company needs to record the transaction by reducing the Accounts Payable and Inventory accounts. Therefore, the best choice is to debit Accounts Payable $1,100 and credit Inventory $1,100 in the general journal (option E). Option A records the transaction as if the company had paid for the merchandise in cash, which is incorrect. Option B records the transaction in the cash disbursements journal, but it should be recorded in the purchases journal. Option C records the transaction as if the company had received a credit from the supplier, which is also incorrect. Option D records the cash disbursement, but not the reduction in inventory.

Wexim Toys Purchased Merchandise from a Supplier on Credit, Terms