Question

A company purchased $1,900 of merchandise on July 5 with terms 210, 1/30. On July 7, it returned $200 worth of merchandise. On July 29, it pa u 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 rctum on July 7 is: Multiple Choice o Debit Accounts Payale $1.800; creclit Purchase Returns $200: credit Merchandise inventory $1,600. o Debit Accounts Payab e $200, credit Merchandise Inventory 5200 o Debit Merchand se inventory $1600; Credit Cash $1,600 o O Debit Merchandise Inventory $200; credit Accounts Payable 5200. o Debit Merchandise Inventory $200, credit Sales Returns 5200.

Answer 1

Correct answer-------Debit accounts payable $200; Credit Merchandise Inventory $200.

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When inventory was purchased on July 5 the merchandise inventory would have been debited for $1800. When inventory was returned then inventory has to be reduced by $200 so on the date of return Merchandise inventory will be Credited. The liability to pay for inventory has also decreased hence accounts payable will also decrease by a debit.