A Company That Uses a Perpetual Inventory System Purchased Inventory $$\begin{array} { | c | r | r | } \hline \text { Purchase Returns } & 600 & \\\hline \text { Accounts Payable } & & 600 \\\hline\end{array}$$

question 176

Multiple Choice

A company that uses a perpetual inventory system purchased inventory on account and later returned goods worth $600 to the vendor.Which of the following would be the correct journal entry to record these returns?

• A) \[\begin{array} { | c | r | r | }
• \hline \text { Purchase Returns } & 600 & \\
• \hline \text { Accounts Payable } & & 600 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | r | r | }
• \hline \text { Accounts Payable } & 600 & \\
• \hline \text { Purchase Returns } & & 600 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | r | r | }
• \hline \text { Merchandise Inventory } & 600 & \\
• \hline \text { Accounts Payable } & & 600 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Accounts Payable } & 600 & \\
• \hline \text { Merchandise Inventory } & & 600 \\
• \hline
• \end{array}\]

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Definitions:

Retained Earnings

The portion of net income that is kept by a company rather than distributed to its shareholders as dividends, to be reinvested in the business or to pay debt.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, also referred to as shareholders' equity.

Par Common Stock

The face value of a common stock, which is the stated value per share set in the corporate charter and used in the balance sheet under shareholders' equity.

At Cost

A term used to describe goods or services being sold or valued at their original purchase price, without any markup or profit margin.