Asked by Alejandra Quiroz on Jun 05, 2024
Verified
Mack Industries uses the periodic inventory system. What is the entry to record a $450 merchandise purchase on account from Nickel Corporation?
A) Debit Accounts Payable for $450; credit Sales for $450.
B) Debit Purchases for $450; credit Accounts Payable for $450.
C) Debit Purchases for $450; credit Merchandise Inventory for $450.
D) Debit Merchandise Inventory for $450; credit Accounts Payable for $450.
Periodic Inventory System
A periodic inventory system is a method of inventory valuation where a physical count of inventory is performed at specific intervals to determine the ending inventory balance and the cost of goods sold.
Accounts Payable
Liabilities or amounts owed by a company for goods or services that have been received but not yet paid for.
- Learn the differentiation in the approach to recording inventory transactions between perpetual and periodic systems.
- Specify the accounts involved and the alterations incurred in the periodic inventory system.
Verified Answer
ZK
Zybrea KnightJun 08, 2024
Final Answer :
B
Explanation :
Under the periodic inventory system, purchases are recorded in the Purchases account rather than directly in the Merchandise Inventory account. Therefore, when Mack Industries purchases merchandise on account, it debits Purchases for $450 and credits Accounts Payable for $450, reflecting the increase in inventory and the corresponding liability.
Learning Objectives
- Learn the differentiation in the approach to recording inventory transactions between perpetual and periodic systems.
- Specify the accounts involved and the alterations incurred in the periodic inventory system.
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