A Firm Uses the Periodic Inventory Method

question 117

Multiple Choice

A firm uses the periodic inventory method. Which of the following entries would be made to record a return of $220 of inventory purchased on credit, including GST?

• A)The accounting entry would be a $220 debit to Accounts payable, a $200 credit to Purchase returns and allowances, and a $20 credit to GST Clearing.
• B)The accounting entry would be a $220 debit to Purchases and a $220 credit to Accounts payable.
• C)The accounting entry would be a $200 debit to Accounts payable and a $200 credit to Purchases.
• D)The accounting entry would be a $200 debit to Purchase returns and allowances, a $20 debit to GST Clearing and a $220 credit to Accounts payable.

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Definitions:

Factory Overhead

The total of all indirect costs associated with manufacturing, including indirect labor, materials, and expenses not directly tied to the production of goods.

Manufacturing Costs

Expenses directly related to the production of goods, including direct labor, direct materials, and overhead costs.

Controlling

A management function that involves monitoring and evaluating performance to ensure that organizational objectives are achieved efficiently and effectively.

Operating Results

The summary of a company's revenues, expenses, and net income or loss for a specific period of time, reflecting its business performance.