Centex sound systems purchased merchandise inventory costing $8,000 from flower co. on account. Centex should record this transaction in the purchase journal and account which is credited is credit accounts payable.
A merchandise inventory is a part of the current asset. It is previously bought by the company to resell it at a higher price to its customers. So when a merchandise inventory is purchased on account, it is first recorded to the purchase journal.
As the company incurs a liability, the credit account is the accounts payable. Thus, the journal entry for the purchase of inventory on account is shown below.
Debit Credit
Merchandise inventory $8,000
Accounts payable $8,000
Hence, the transaction should be recorded in the purchase journal.
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