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Adidea Corp. purchased 500 units of merchandise at $15 per unit from a vendor. It pays 50 percent of its purchase with cash and puts the rest on credit. How will the company record this transaction, assuming it uses a perpetual system?

Respuesta :

Merchandise Inventory                          7,500
                   Cash in bank                                                  3,750
                   Accounts Payable                                          3,750

Answer:

Particular                                                   Debit               Credit

Inventory (Merchandise)                          7,500

                     Cash (Paid)                                                  3,750

                     Accounts Payable                                       3,750

Explanation:

First, we determine the value of inventory to be recorded in company's books, which would be as follows:

500 units x $15 per unit = $7,500

Now, out of the total value $7,500 half of which is paid in cash and remainder is put on credit. Therefore, 50% ($3,750) will be credited as cash while the rest will be recorded in accounts payable (credit due to be paid on inventory purchased). The total $7,500 will be debited as inventory bought.

Hence, the following inventory:

Particular                                                   Debit               Credit

Inventory (Merchandise)                          7,500

                     Cash (Paid)                                                  3,750

                     Accounts Payable                                       3,750

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