Hill Company Uses the Periodic Inventory System

question 98

Multiple Choice

Hill Company uses the periodic inventory system. It records a transaction that increases the balances in its purchases and accounts payable accounts. Which of the following is true about Hill Company?

• A) When the related merchandise is sold, the purchases account will be decreased by the related cost of goods sold.
• B) The manner in which this transaction was recorded indicates that Hill returned $6,000 of merchandise to a supplier.
• C) The balance in the account will appear on the balance sheet at year end.
• D) The manner in which this transaction was recorded indicates that Hill purchased inventory on account.

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Definitions:

Tangible Products

Physical items that can be touched, seen, and measured, such as electronics, clothing, and furniture.

Intangibles

Non-physical assets such as patents, copyrights, brand recognition, and goodwill that have value but are not physical objects.

Merchandise Trade Balance

The difference between a country's imports and exports of goods.

Tangible Products

Physical items that can be touched, seen, and usually measured, such as books, furniture, and food items.