Ask Question
7 February, 12:23

Shankar Company uses a perpetual system to record inventory transactions. The company purchases 1,500 units of inventory on account on February 2 for $60,000 ($40 per unit) but then returns 100 defective units on February 5.

Record the inventory purchase on February 2 and the inventory return on February 5.

+3
Answers (1)
  1. 7 February, 14:23
    0
    February 2

    Debit Inventory $60,000

    Credit Cash/Accounts payable $60,000

    February 5

    When a return of the item purchased is done,

    Debit Cash/Account payable $4,000

    Credit Inventory $4,000

    Explanation:

    In the perpetual inventory system, any movement (sale or return or purchase) must be adjusted in the books once the item moves.

    When an item is purchased, such purchase may be done by cash or on account, the entries required are

    Debit Inventory

    Credit Cash/Accounts payable

    When a return of the item purchased is done,

    Debit Cash/Account payable

    Credit Inventory

    Amount returned = $40 * 100

    = $4,000
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Shankar Company uses a perpetual system to record inventory transactions. The company purchases 1,500 units of inventory on account on ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers