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