A company purchased $3,600 of merchandise on July 5 with terms 2/10, n/30. On Ju
ID: 2596613 • Letter: A
Question
A company purchased $3,600 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $800 worth of merchandise. On July 12, 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 payment on July 12 is Multiple Choice Debit Merchandise Inventory $2,800; credit Cash $2,800. Debit Cash $2,800; credit Accounts Payable $2,800 Debit Accounts Payable $2,800; credit Merchandise Inventory $56; credit Cash $2,744 Debit Accounts Payable $3,600; credit Cash $3,600. Debit Accounts Payable $2,800; creait Cash $2,800.Explanation / Answer
Date
Accounts title and explanation
Debit
Credit
July 5th
Merchandise Inventory
3600
Accounts Payable
3600
Being purchase of Inventory on Credit
July 7th
Accounts Payable
800
Merchandise Inventory
800
Being return of Purchased Inventory
July 12th
Accounts Payable
2800
Merchandise Inventory (2800*2%)
56
Cash (2800 - 56)
2744
Being payment made for goods purchased on credit
We will pass the following entries for the transactions took place on different dates.
We are following the perpetual inventory system and therefore, to record the amount of discount received we will credit Merchandise Inventory. Therefore, we will debit the Accounts payable as it was a reduction of liability and we will credit cash as there will be outflow of assets.
Therefore the right answer is option (C) Debit Accouts Payable $ 2800; Credit Merchandise Inventory $ 56; Credit $ 2744.
Date
Accounts title and explanation
Debit
Credit
July 5th
Merchandise Inventory
3600
Accounts Payable
3600
Being purchase of Inventory on Credit
July 7th
Accounts Payable
800
Merchandise Inventory
800
Being return of Purchased Inventory
July 12th
Accounts Payable
2800
Merchandise Inventory (2800*2%)
56
Cash (2800 - 56)
2744
Being payment made for goods purchased on credit
We will pass the following entries for the transactions took place on different dates.
We are following the perpetual inventory system and therefore, to record the amount of discount received we will credit Merchandise Inventory. Therefore, we will debit the Accounts payable as it was a reduction of liability and we will credit cash as there will be outflow of assets.
Therefore the right answer is option (C) Debit Accouts Payable $ 2800; Credit Merchandise Inventory $ 56; Credit $ 2744.
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