A Merchandiser Uses a Perpetual Inventory System

question 54

Multiple Choice

A merchandiser uses a perpetual inventory system. The beginning Capital balance of a merchandiser was $100,000. During the year, sales revenue amounted to $75,000, sales returns and allowances were $1,000, sales discounts were $3,000, cost of goods sold was $40,000, and all other expenses totaled $10,000. The total withdrawals amounted to $25,000.The last step in the closing process would include:

• A)a debit to Income Summary for $54,000.
• B)a credit to Income Summary for $75,000.
• C)a debit to Owner's Name, Capital for $21,000.
• D)a debit to Owner's Name, Capital for $25,000.

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Definitions:

Accounting Principle

Fundamental guidelines or rules that govern how financial transactions and events are recorded and reported in financial statements.

IFRS

International Financial Reporting Standards; a set of accounting standards developed by the International Accounting Standards Board (IASB) that guide the preparation of financial statements globally.

Beginning Inventory

The value of all goods available for sale at the start of an accounting period.

Net Income

The net income of a business following the subtraction of all costs, taxes, and operational expenses from its revenue.