Question

Travis Company's journal entries for purchasing merchandise on account:

a) [Date] Accounts Payable $9,200, Inventory $9,200
b) [Date] Inventory $9,200, Accounts Payable $9,200

Answer 1

The journal entries given are for Travis Company's purchase of merchandise on account. In journal entry a), the Accounts Payable account is debited (increased) by $9,200, and the Inventory account is credited (increased) by the same amount. In journal entry b), the opposite entry is made.

Step-by-step explanation:

The journal entries given are for Travis Company's purchase of merchandise on account. In accounting, when a business purchases merchandise on account, it means that the business receives the merchandise but does not pay for it immediately. Instead, the business creates a liability called Accounts Payable for the amount owed to the supplier and increases the Inventory account to reflect the increase in assets.

In journal entry a), the Accounts Payable account is debited (increased) by $9,200, and the Inventory account is credited (increased) by the same amount. This indicates that Travis Company has received merchandise worth $9,200 but has not yet paid for it.

In journal entry b), the opposite entry is made. The Inventory account is debited (decreased) by $9,200, and the Accounts Payable account is credited (decreased) by the same amount. This entry indicates that Travis Company has now paid off the amount owed and reduced its liability.