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:

Foreign Currency

Currency used in international trade and investment, which is different from the domestic currency of the country of operation.

Presentation Currency

The currency in which a company's financial statements are presented, typically the national currency of the country where the company operates.

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity, typically comprising the balance sheet, income statement, and cash flow statement.

Historical Rate

An exchange rate used to convert foreign currency amounts involved in a transaction to the functional currency at the date the transaction occurred.