Financial Accounting

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Perpetual Inventory System Purchase and Sales


InnovToys had the following transactions during July, 2015. InnovToys used the perpetual inventory system for its inventory related transactions.

7/1 Purchased toy inventory on account from ToyWarehouse for \$2,500
7/12 Sold toys for \$1,000 cash with costs of \$500
7/13 Paid ToyWarehouse \$2,500 for the purchase on 7/1

(I): On 7/1, which account should InnovToys debit when recording the purchase?

(II): On 7/12, the information about \$500 cost is used to reflect an increase in _________________.