Company Uses the Periodic Inventory Method and Offers the Following

question 145

Multiple Choice

Company uses the periodic inventory method and offers the following information:
$\begin{array} { l r } \text { Beginning inventory } & \$ 4,000 \\\text { Purchases } & \$ 120,000 \\\text { Purchase discounts } & \$ 2,400 \\\text { Purchase returns and allowances } & \$ 800\end{array}$
At the end of the period,the company does an inventory count and finds $16,000 of inventory on hand.
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Which of the following T-accounts accurately represents the first three closing entries?

• A)
• \[\begin{array}{c} { \text { Cost of goods sold } } \\
• \hline\begin{array}{ l r | l }
• \text { 1) } & & 4,000 \\
• \text { 2) } & 16,000 & \\
• \text { 3) } & & 116,800
• \end{array}\end{array}\]
• B)
• \[\begin{array}{c} { \text { Cost of goods sold } } \\
• \hline\begin{array}{ l r | l }
• \text { 1) } & 116,800 & \\
• 2 ) & 4,000 & \\
• 3 ) & & 116,000
• \end{array}\end{array}\]
• C)
• \(\begin{array}{lr|r}
• {\text { Cost of goods sold }} \\
• \hline \text { 1) } && 116,800 & \\
• \text { 2) } & & 16,000 \\
• \text { 3) } & 4,000 &
• \end{array}\)
• D)
• \(\begin{array}{lr|r}
• {\text { Cost of goods sold }} \\
• \hline \text { 1) } & 4,000 & \\
• \text { 2) } & & 16,000 \\
• \text { 3) } & 116,800 &
• \end{array}\)

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Definitions:

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual installments.

Salvage Value

The anticipated value left in an asset at the conclusion of its serviceable life, employed in the depreciation calculation.

Useful Life

The estimated period during which an asset is expected to be usable for its intended purpose, affecting its depreciation calculation.

Journal Entries

The recordation of a transaction in an accounting journal that impacts at least two accounts, indicating the debit and credit amounts.