The company returned $400 of damaged merchandise purchased on credit. The entry to record this under the periodic inventory method is:
A) debit Merchandise Inventory $400; credit Accounts Payable $400.
B) debit Cost of Goods Sold $400; credit Accounts Payable $400.
C) debit Accounts Payable $400; credit Purchases Returns and Allowances $400.
D) debit Accounts Payable $400; credit Merchandise Inventory $400.
Answer: C
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