A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, The correct journal entry to record the purchase on July 5 is:

Multiple Choice

• Debit Merchandise Inventory $1,600; credit Cash $1,600.
• Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600.
• Debit Merchandise Inventory $1,800; credit Sales Returns $200; credit Cash $1,600.
• Debit Merchandise Inventory $1,800; credit Accounts Payable $1,800.
• Debit Accounts Payable $1,800; credit Merchandise Inventory $1,800.