The Journal Entry to Record a Return of Merchandise Purchased

question 224

Multiple Choice

The journal entry to record a return of merchandise purchased on account under a periodic inventory system would be

• A) Accounts Payable Purchase Returns and Allowances
• B) Purchase Returns and Allowances Accounts Payable
• C) Accounts Payable Inventory
• D) Inventory Accounts Payable

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Definitions:

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and outflows.

Internal Rate of Return

A metric used in capital budgeting to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Time Value

The principle that money currently in hand is valued higher than an identical amount received in the future, owing to its capacity to generate earnings.

Accounting Rate of Return

A financial ratio that measures the expected profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.