Question

A buyer uses a periodic inventory system, and on December 7, it contacts a supplier to report that some of the merchandise it purchased on December 5 was defective. The supplier was unwilling to accept a return of that merchandise, but instead offered to reduce the price by $400. The buyer agreed to keep the defective merchandise under these terms. Complete the buyer's necessary journal entry by selecting the Account Names and dollar amounts from the drop-down menus.

Answer 1

Answer:

The journal entry in the books of buyer is as follows:

Explanation:

Accounts Payable A/c.....................Dr   $400

       To Merchandise Inventory A/c......Cr   $400

As the supplier offered him reduction in price instead of taking back the defective goods. So, the accounts payable account will be reduced by the amount which is reduced by the supplier in total amount of goods purchased by buyer. Therefore, the accounts payable account is debited and the account of merchandise inventory is credited.