Question

Juniper Company uses a perpetual inventory system and the gross method of accounting for purchases. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise. On August 26, it paid the full amount due. The correct journal entry to record the merchandise return on August 11 is:a. Debit Merchandise Inventory $1500; Credit Sales Returns $1500 (chosen answer)b. Debit Accounts Payable $1500; Credit Purchase Returns $1500c. Debit Accounts Payable $1500; Credit Cash $1500d. Debit Accounts Payable $1500; Credit Merchandise Inventory $1500e. Debit Merchandise Inventory $1500; Credit Cash $1500

Answer 1

Answer:

The answer is: D) Debit Accounts Payable $1500; Credit Merchandise Inventory $1500

Explanation:

The correct records should be:

• Dr Accounts Payable account 1,500
• Cr Merchandise Inventory account 1,500

Accounts Payable is a liability, and when liabilities decrease (the returned merchandise reduces the debt), they should be debited.

Merchandise Inventory is an asset, and when assets decrease (some merchandise was returned), they should be credited.