Using a Perpetual Inventory System, the Entry to Record the Purchase

question 118

Multiple Choice

Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a

• A) debit to Accounts Payable
• B) debit to Inventory
• C) credit to Inventory
• D) credit to Sales

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Definitions:

Intrinsic Value

The inherent, actual value of an asset, independent of its market value.

Underwater

A situation where the market value of an asset is less than the amount owed on it, often used in reference to mortgages.

Expiration Date

The last day on which an option or futures contract is valid or can be exercised.

Option

A financial derivative that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price within a specific timeframe.