Question

A buyer uses a perpetual inventory system, and on December 7, it contacts its supplier to report that some of the merchandise purchased on December 5 was defective. The seller offered to reduce the merchandise price by $400. The buyer agreed to keep the defective merchandise under those terms. Complete the buyer's necessary journal entry.

Answer 1

The answer is: record a $400 debit on accounts payable and a $400 credit on merchandise inventory

Step-by-step explanation:

The buyer should record a debit on accounts payable for $400, and should record a credit for merchandise inventory for $400.

Accounts payable is a liability, so when you record a debit, you are decreasing it.

Merchandise inventory is a current asset, so when you record a credit, you are decreasing it.