Question

Adidea Corp. purchased 500 units of merchandise at $15 per unit from a vendor. It pays 50 percent of its purchase with cash and puts the rest on credit. How will the company record this transaction, assuming it uses a perpetual system?

Answer 1

Particular Debit Credit

Inventory (Merchandise) 7,500

Cash (Paid) 3,750

Accounts Payable 3,750

Step-by-step explanation:

First, we determine the value of inventory to be recorded in company's books, which would be as follows:

500 units x $15 per unit = $7,500

Now, out of the total value $7,500 half of which is paid in cash and remainder is put on credit. Therefore, 50% ($3,750) will be credited as cash while the rest will be recorded in accounts payable (credit due to be paid on inventory purchased). The total $7,500 will be debited as inventory bought.

Hence, the following inventory:

Particular Debit Credit

Inventory (Merchandise) 7,500

Cash (Paid) 3,750

Accounts Payable 3,750

Answer 2

Merchandise Inventory 7,500
Cash in bank 3,750
Accounts Payable 3,750