A company uses the perpetual inventory system and recorded the following entry: Accounts Payable 2,500 Merchandise Inventory 50 Cash 2,450 This entry reflects a:

The entry reflects a debit to the Accounts Payable and a credit to the Merchandise Inventory and Cash, signifying full settlement of debt with merchandise $50 and cash $2,450.

Explanation:

When Accounts Payable is debited, it means that it is being paid.  In this case, there are two stated ways for the settlement.  The supplier was paid $50 in goods and $2,450 in cash.  While, the supplier was being owed the sum of $2,500, he agreed to accept merchandise at cost of $50 and the remainder in cash of $2,450.  This entry also satisfies the accounting equation, keeping the two sides in balance, as Liabilities are reduced by $2,500 and Assets are reduced by the same amount.

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