Phones R Us Uses a Perpetual Inventory System When Recording

question 78

Multiple Choice

Phones R Us uses a perpetual inventory system when recording its cash payments and cash receipts. In June, the business purchases $5,000 of goods on account with terms of 2/10, n/30. Select the correct entry to record the payment of the goods within the discount period.

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Definitions:

Materials Cost

The cost of raw materials used to produce goods.

Process Costing

A method of costing that is used in industries where production is continuous and the product is indistinguishable from unit to unit.

Equivalent Units

A concept used in cost accounting to represent the amount of work done on partially finished goods, converted into the number of fully finished units.

Conversion Costs

The combination of labor and manufacturing overhead costs required to transform raw materials into finished products.