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:
Debit Merchandise Inventory $200; credit Accounts Payable
- Debit Merchandise Inventory $200; credit Sales Returns $200.
Debit Accounts Payable $1,800; credit Purchase Returns $200;
credit Merchandise Inventory $1,600.
- Debit Merchandise Inventory $1,600; credit Cash $1,600.
- Debit Accounts Payable $200; credit Merchandise Inventory $2
Answer is Option E)
Debit Account Payable $200
Credit Merchandise Inventory $200
Accounts payable has been reduced and Inventory is credited at
$200 ( Since Gross method is followed )