Maxwell Inc

Maxwell Inc.uses the periodic inventory method.Maxwell requested a price reduction from a vendor because the merchandise that was purchased did not meet specifications.The vendor sent Maxwell a credit memorandum for $4,100 to resolve the issue.How would Maxwell record this transaction?

A) Debit Cost of Goods Sold for $4,100 and credit Accounts Payable for $4,100.
B) Debit Merchandise Inventory for $4,100 and credit Accounts Payable for $4,100.
C) Debit Accounts Payable for $4,100 and credit Merchandise Inventory for $4,100.
D) Debit Purchase Returns and Allowances for $4,100 and credit Accounts Payable for $4,100.
E) Debit Accounts Payable for $4,100 and credit Purchase Returns and Allowances for $4,100.

Correct Answer:

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