A company purchased 1800 of merchandise on july 5

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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
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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 )

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