A Firm Uses the Periodic Inventory Method

question 11

Multiple Choice

A firm uses the periodic inventory method. Which of the following entries would be made to record a purchase of inventory on credit?

• A)The accounting entry would be a debit to Inventory, a debit to GST Clearing and a credit to Accounts payable.
• B)The accounting entry would be a debit to Accounts payable, a credit to Purchases and a credit to GST Clearing.
• C)The accounting entry would be a debit to Accounts payable, a credit to Inventory and a credit to GST Clearing.
• D)The accounting entry would be a debit to Purchases, a debit to GST Clearing and a credit to Accounts payable.

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Definitions:

Excise Tax

A tax applied to specific goods, services, or activities, often with the intention of reducing consumptions, such as taxes on tobacco or alcohol.

Tax Incidence

The study of who ultimately bears the economic burden of a tax, whether producers or consumers.

Inelastic Demand

A situation where the demand for a product does not significantly change with a change in its price.

Excise Tax

A tax levied on the sale of particular goods and services, such as alcohol, tobacco, and gasoline.