The perpetual inventory system directly affects the Inventory account for all purchase transactions, including returns and allowances.

Concept #1: Perpetual Inventory: Purchases

Concept #2: Perpetual Inventory: Purchase Returns

Concept #3: Perpetual Inventory: Purchase Allowance

Additional Problems
The following information applied to Greer, Inc. for 2001: Merchandise purchased for resale                            $200,000 Freight-in                                                                     8,000 Freight-out                                                                   5,000 Purchase returns                                                         2,000 Greer's 2001 inventoriable cost was a. $200,000. b. $203,000. c. $206,000. d. $211,000.
Under a perpetual inventory system, acquisition of merchandise for resale is debited to the a. Merchandise Inventory account. b. Purchases account. c. Supplies account. d. Cost of Goods Sold account.
J Company uses a perpetual inventory system. The company purchased $9,750 of merchandise on August 7 with terms 2/10, 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 Merchandise Inventory $1,500; credit Sales Returns $1,500. b. Debit Accounts Payable $1,500; credit Purchase Returns $1,500. c. Debit Accounts Payable $1,500; credit Merchandise Inventory $1,500. d. Debit Accounts Payable $1,500; credit Cash $1,500.
On September 12, J Company purchased merchandise in the amount of $5,800 from V Company on credit with terms of 2/10, n/30. J Company receives a $800 allowance on September 15 and pays the balance of the invoice on September 28. If J company uses the perpetual inventory method, the credit in the September 15 entry would be: a. Purchase returns and allowances b. Merchandise Inventory c. Purchase discounts d. Cash