Question

A company that uses a perpetual inventory system purchased inventory on account and later returned goods worth $500 to the vendor. Which of the following would be the correct journal entry to record these returns?

A) Debit Purchase Returns $500; credit Accounts Payable $500B) Debit Accounts Payable $500; credit Merchandise Inventory $500C) Debit Merchandise Inventory $500; credit Accounts Payable $500D) Debit Accounts Payable $500; credit Purchase Returns $500

Answer 1

B) Debit Accounts Payable $500; credit Merchandise Inventory $500

Step-by-step explanation:

For recording the returned inventory using the perpetual inventory, the journal entry is shown below:

Account payable $500

To Merchandise inventory $500

(Being the returned inventory is recorded)

For recording this, we debited the account payable as it decrease the current liabilities and at the same time it decreased the assets also so the merchandise inventory is credited