Answer:
Debit Inventory $55,500
Credit Accounts payable $55,500
and
Debit Account payable $3700
Credit Inventory account $3700
Explanation:
When inventory is purchased with cash, an asset is exchanged for another otherwise, the transaction would require the recognition of a liability in form of trade payables.
Given that the purchases 1,500 units of inventory on account on February 2 for $55,500 ($37 per unit), entries required
Debit Inventory $55,500
Credit Accounts payable $55,500
Being entries to record inventory purchased on account
Where the company then returns 100 defective units on February 5
Cost of returns = 100 × $37
= $3700
Entries required
Debit Account payable $3700
Credit Inventory account $3700
Being entries to record inventory returned
