Question

REI purchases inventory from Nike for $25,000 using credit and plans to sell that inventory in the future for $50,000. The entry that REI records is a Debit to and a credit to____________.

Answer 1

Answer:

Debit Inventory $25,000

Credit Accounts Payable $25,000

Explanation:

When inventory is purchased, payments may be made immediately or scheduled for a later date agreed with the supplier.

For cash purchase, the entries required are;

Debit Inventory (with the purchase cost)

Credit Cash account

For credit purchase, the entries required are;

Debit Inventory (with the purchase cost)

Credit Accounts Payable