Parker Company uses the perpetual inventory system. It bought merchandise on account from Beige Inc, invoice no. 342, $20,000; terms 1/15, n/30; dated June 25; FOB San Francisco, freight prepaid and added to the invoice, $1,800 (total $21,800). Which of the following journal entries records this purchase transaction?

a. A debit to Merchandise Inventory of $23,600, a credit to Accounts Payable of $23,600

b. A debit to Merchandise Inventory of $21,800, a credit to Accounts Payable of $21,800

c. A debit to Merchandise Inventory of $20,000, a debit to Freight of $1,800, a credit to Accounts Payable of $21,800

d. A debit to Cost of Goods Purchased of $20,000, a debit to Freight Out of $1,800, a credit to Accounts Payable of $21,800

Question

Business

Melany Simpson

15 June, 02:58

Parker Company uses the perpetual inventory system. It bought merchandise on account from Beige Inc, invoice no. 342, $20,000; terms 1/15, n/30; dated June 25; FOB San Francisco, freight prepaid and added to the invoice, $1,800 (total $21,800). Which of the following journal entries records this purchase transaction?

a. A debit to Merchandise Inventory of $23,600, a credit to Accounts Payable of $23,600

b. A debit to Merchandise Inventory of $21,800, a credit to Accounts Payable of $21,800

c. A debit to Merchandise Inventory of $20,000, a debit to Freight of $1,800, a credit to Accounts Payable of $21,800

d. A debit to Cost of Goods Purchased of $20,000, a debit to Freight Out of $1,800, a credit to Accounts Payable of $21,800

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Answers (1)

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Audrina Perkins · Answer 1

b. A debit to Merchandise Inventory of $21,800, a credit to Accounts Payable of $21,800

Explanation:

Parker Company uses the perpetual inventory system. It bought merchandise on account from Beige Inc, invoice no. 342, $20,000; terms 1/15, n/30; dated June 25; FOB San Francisco, freight prepaid and added to the invoice, $1,800 (total $21,800).

The following journal entries records this purchase transaction: A debit to Merchandise Inventory of $21,800, a credit to Accounts Payable of $21,800

The reason is that with a perpetual inventory system, transportation costs are added directly to the inventory balance