When Merchandise Is Acquired on Account and the Perpetual System

question 79

Multiple Choice

When merchandise is acquired on account and the perpetual system of inventory is used, the journal entry for the purchase would include

• A) debiting Purchases and crediting Accounts Payable.
• B) debiting Accounts Payable and crediting Merchandise Inventory.
• C) debiting Merchandise Inventory and crediting Accounts Payable.
• D) debiting Accounts Payable and crediting Purchases.

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Definitions:

Transaction Price

The amount of consideration expected to be received from a customer in exchange for transferring goods or services.

Multiple-Step Statement

A multiple-step statement is an income statement format that separates operating revenues and expenses from non-operating ones, providing detailed insight into a company's financial performance.

Operating Expenses

Regular costs associated with running a business's day-to-day operations, excluding the cost of goods sold.

Non-Operating Activities

Transactions and events that are not related to a company's core operations, such as investment income or losses.