Question

A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid 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 return on July 7 is: Multiple Choice Debit Merchandise Inventory $1,600; credit Cash $1,600. Debit Merchandise Inventory $200; credit Accounts Payable $200. Debit Merchandise Inventory $200; credit Sales Returns $200. Debit Accounts Payable $200; credit Merchandise Inventory $200. Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600.

Answer 1

Answer:

Debit Accounts Payable $200; credit Merchandise Inventory $200

Explanation:

The journal entry is shown below:

Account payable A/c Dr $200

          To Merchandise Inventory A/c $200

(Being the returned inventory is recorded)    

For recording this journal entry we debited the account payable as it reduced the liabilities and at the same time it also reduced the asset so that the proper  posting could be done