Juniper Company, Inc

question 56

Multiple Choice

Juniper Company, Inc. uses a perpetual inventory system. 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 16, it paid the full amount due. The correct journal entry to record the purchase on August 7 is:

• A)Debit Merchandise Inventory $9,750; credit Cash $9,750.
• B)Debit Accounts Payable $9,750; credit Merchandise Inventory $9,750.
• C)Debit Merchandise Inventory $9,750; credit Sales Returns $1,500; credit Cash $8,250.
• D)Debit Merchandise Inventory $9,750; credit Accounts Payable $9,750.
• E)Debit Accounts Payable $8,250; debit Purchase Returns $1,500; credit Merchandise Inventory $9,750.

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Definitions:

Net Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of the business.

Short-Term Debt

Financial obligations that are due for repayment within one year.

Current Liabilities

Obligations expected to require cash in less than one year, usually payables and accruals.

Temporary Working Capital

Additional working capital needed to support the fluctuating levels of business activity.