A company purchased $3,000 of merchandise on July 5 with terms 3/10, n/30. On July 7, it returned...


A company purchased $3,000 of merchandise on July 5 with terms 3/10, 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:

a. Debit: Cash, $2,200; Credit: Accounts Payable, $2,200.

b. Debit: Accounts Payable, $2,200; Credit: Merchandise Inventory, $66; Credit: Cash, $2,134.

c. Debit: Merchandise Inventory, $2,200; Credit: Cash, $2,200.

d. Debit: Accounts Payable, $3,000; Credit: Cash, $3,000.

e. Debit: Accounts Payable, $2,200; Credit: Cash, $2,200.

Perpetual inventory:

The perpetual inventory system tracks inventory levels in real-time by continuously updating inventory balances with each transaction involving the movement of goods. In other words, perpetual inventory systems maintain a running record of all inventory transactions, including purchases, sales, and returns.

Answer and Explanation: 1

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To answer the above problem, let us first recognize the above transactions using the perpetual inventory system as follows.

DateAccount TitleDebitCr...

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Perpetual Inventory System: Definition, Advantages & Examples


Chapter 1 / Lesson 15

Learn about the perpetual inventory system and how it is used. Explore the advantages of perpetual inventory systems and compare perpetual vs. periodic inventory.

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