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Chapter 5: Q5-8RQ (page 294)

What account is debited when recording a purchase of inventory when using the perpetual inventory system?

Short Answer

Expert verified

When the perpetual inventory system is used, themerchandise inventory account is debited at the time of purchase.

Step by step solution

01

Process of Accounting under Perpetual Inventory System

Both inventory systems of accounting record the transactions differently in the books of accounts. Theperiodic inventory system uses asales and purchases account, while the perpetual inventory system uses a merchandise inventory account.

02

Recording of purchase of inventory under a perpetual inventory system

When the business entities use the perpetual inventory system, the merchandise inventory account is debited or credited at the time of purchase or sale of inventory.

The journal entry for inventory purchase is as follows:

Date

Accounts and Explanation

Debit ($)

Credit ($)

Merchandise Inventory

XXX

Cash/Accounts payable

XXX

(To record the purchase of inventory)

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Most popular questions from this chapter

Highlight the differences in the closing process when using the periodic inventory system rather than the perpetual inventory system.

Click Computers has the following transactions in July related to purchasing and sale of merchandise inventory.

July 1 Purchase of \(20,500 worth of computers on account, terms of 2/10, n/30.

3 Return of \)4,000 of the computers to the vendor.

9 Payment made on the account.

12 Sold computers on account for $8,000 to a customer, terms 3/15, n/30.

26 Received payment from customer on balance due.

Journalize the transactions for Click Computers assuming that the company uses the periodic inventory system.

What account is debited when recording a purchase of inventory when using a periodic inventory system?

Describe the calculation of cost of goods sold when using the periodic inventory system.

Capital City Motorcycle’s selected accounts as of December 31, 2018, follow:

Selling Expenses $ 10,500

Interest Revenue 1,000

Net Sales Revenue 113,500

Cost of Goods Sold 85,000

Administrative Expenses 8,000

Determine the gross profit percentage for the year ended December 31, 2018.
See all solutions

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