Leighton Company Uses the Perpetual Inventory Method

question 124

Multiple Choice

Leighton Company uses the perpetual inventory method.On September 6,Loughton sold merchandise to Cray Company on terms of FOB shipping point.That same day,Loughton paid $700 cash for related shipping charges.How would Leighton record this payment?

• A)Debit Merchandise Inventory for $700 and credit Cash for $700.
• B)Debit Delivery Expense for $700 and credit Cash for $700.
• C)Debit Accounts Receivable for $700 and credit Cash for $700.
• D)Debit Purchases for $700 and credit Cash for $700.
• E)Debit Cost of Goods Sold for $700 and credit Cash for $700.

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Definitions:

Fair Value

A measure of the price at which an asset could be bought or sold in a current transaction between willing parties, other than in a liquidation sale.

Ethical Challenge

Situations or problems requiring a person or organization to choose between alternatives that must be evaluated as right (ethical) or wrong (unethical).

Acquisition

The process of obtaining control of another company or business entity through purchase, merger, or other means.

Outstanding Shares

Refers to the total number of shares of a corporation's stock that are owned by shareholders at any given time.