A company that uses a perpetual inventory system purchased inventory on account and later returned goods worth $100 to the vendor. Which of the following would be the correct journal entry to record these returns?
A) $$\begin{array} { | c | r | r | }
\hline \text { Purchase Returns } & 100 & \
\hline \text { Accounts Payable } & & 100 \
\hline
\end{array}$$
B) $$\begin{array} { | c | r | r | }
\hline \text { Accounts Payable } & 100 & \
\hline \text { Purchase Returns } & & 100 \
\hline
\end{array}$$
C) $$\begin{array} { | c | r | r | }
\hline \text { Merchandise Inventory } & 100 & \
\hline \text { Accounts Payable } & & 100 \
\hline
\end{array}$$
D) $$\begin{array} { | c | r | r | }
\hline \text { Accounts Payable } & 100 & \
\hline \text { Merchandise Inventory } & & 100 \
\hline
\end{array}$$

Question

A company that uses a perpetual inventory system purchased inventory on account and later returned goods worth $100 to the vendor. Which of the following would be the correct journal entry to record these returns?
A) $$\begin{array} { | c | r | r | } 
\hline \text { Purchase Returns } & 100 & \
\hline \text { Accounts Payable } & & 100 \
\hline
\end{array}$$
B) $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Payable } & 100 & \
\hline \text { Purchase Returns } & & 100 \
\hline
\end{array}$$
C) $$\begin{array} { | c | r | r | } 
\hline \text { Merchandise Inventory } & 100 & \
\hline \text { Accounts Payable } & & 100 \
\hline
\end{array}$$
D) $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Payable } & 100 & \
\hline \text { Merchandise Inventory } & & 100 \
\hline
\end{array}$$

Quizplus · Accepted Answer

In a perpetual inventory system, returns are recorded by debiting Accounts Payable and crediting Merchandise Inventory to reflect the decrease in inventory and the reduction in the amount owed to the vendor.