A Company That Uses the Perpetual Inventory System Purchases Inventory

question 206

Multiple Choice

A company that uses the perpetual inventory system purchases inventory for $62,000 on account,with terms of 2/10,n/30.Which of the following is the journal entry to record the payment made within 10 days?

• A)a debit to Accounts Payable for $62,000,a credit to Cash for $1,240,and a credit to Merchandise Inventory for $60,760
• B)a debit to Accounts Payable for $62,000,a credit to Merchandise Inventory for $1,240,and a credit to Cash for $60,760
• C)a debit to Merchandise Inventory for $1,240,a debit to Accounts Payable for $62,000,and a credit to Cash for $63,240
• D)a debit to Accounts Payable for $60,760,a debit to Merchandise Inventory for $1,240,and a credit to Cash for $62,000

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Definitions:

Flexible Budget

A budget that adjusts or varies with changes in volume, activity, or other relevant factors.

Responsibility Accounting

A system of accounting that involves assigning revenues and costs to the managers responsible for their incurrence, promoting accountability.

Average Month

A concept used to calculate the average results or performance over several months, smoothing out fluctuations.

Return on Investment

A financial metric measuring the profitability of an investment, calculated as net profit divided by the cost of the investment.