Asked by Ramanan Srinivasagopalan on May 12, 2024
Verified
Mack Industries uses the perpetual 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.
Perpetual Inventory System
An inventory management system where records of inventory quantities are updated on a continuous basis as transactions occur.
Accounts Payable
The amount of money a company owes creditors (suppliers, etc.) in return for goods and services they have delivered.
Merchandise Inventory
The value of a company's current inventory of goods available for sale.
- Gain an understanding of the ledger entries concerning the purchase and return of inventory under the perpetual inventory mechanism.
- Uncover the variances between accounts within the perpetual inventory system.
Verified Answer
TH
Trinity HerrinMay 18, 2024
Final Answer :
D
Explanation :
Under the perpetual inventory system, purchases of merchandise are directly added to the Merchandise Inventory account. Therefore, the correct entry is to debit Merchandise Inventory and credit Accounts Payable.
Learning Objectives
- Gain an understanding of the ledger entries concerning the purchase and return of inventory under the perpetual inventory mechanism.
- Uncover the variances between accounts within the perpetual inventory system.