Juniper Company, Inc

Multiple Choice

Juniper Company, Inc. uses the gross method of recording purchases and a perpetual inventory system. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise. On August 26, it paid the full amount due. The correct journal entry to record the merchandise return on August 11 is:

A) Debit Accounts Payable $1,500; credit Merchandise Inventory $1,500.
B) Debit Accounts Payable $1,485; credit Merchandise Inventory $1,485.
C) Debit Merchandise Inventory $1,500; credit Purchase Returns and Allowances $1,500.
D) Debit Merchandise Inventory $1,500; credit Cash $1,500.
E) Debit Accounts Payable $1,500; credit Purchase Returns and allowances $1,500.