A Company That Uses the Gross Method of Recording Purchases

question 157

Multiple Choice

A company that uses the gross method of recording purchases and a perpetual inventory system purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. The correct journal entry to record the merchandise return on July 7 is:

• A)Debit Accounts Payable $196; credit Merchandise Inventory $196.
• B)Debit Merchandise Inventory $200; credit Accounts Payable $200.
• C)Debit Merchandise Inventory $200; credit Sales Returns $200.
• D)Debit Accounts Payable $200; credit Merchandise Inventory $200.
• E)Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600.

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Definitions:

Consumer Tastes

Preferences and desires of consumers regarding the choice of products or services, influencing market demand.

Traditional Management Rights

The rights inherently held by employers to make operational decisions, including hiring, work assignments, and terminations, without needing union approval or negotiation.

Canadian Joint Industrial Councils

Advisory bodies in Canada that bring together representatives from labor and management to discuss issues affecting their industries.

Nonunion Representation

Representation of workers' interests in the workplace without the formal structure or support of a labor union.