Under the Perpetual Inventory System, What Is the Entry for the Credit

question 20

Multiple Choice

Under the perpetual inventory system, what is the entry for the credit purchase of 10 electric guitars at $250 per guitar plus GST of $25 each?

• A) Debit inventory $2750; credit accounts payable $2500; credit GST outlays $250
• B) Debit inventory $2500; debit GST outlays $250; credit accounts payable $2750
• C) Debit inventory $2750; credit accounts payable $2750
• D) Credit accounts payable $2750; debit inventory $2500; credit GST collections $250

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Definitions:

Trade-In Allowance

The amount credited to a customer for the trade-in of a used item towards the purchase of a new item.

Book Value

The net value of an asset reported in the financial statements, calculated as the original cost minus any depreciation, amortization, or impairment costs.

Accumulated Depreciation

The cumulative sum of depreciation costs charged to a fixed asset from the time it was first utilized.

Accumulated Depreciation

The aggregate cost of a tangible asset that has been recognized as depreciation since the asset's initial use.