A Company That Uses the Perpetual Inventory System Purchased Inventory $$\begin{array} { | l | c | c | } \hline \text { Cash } & 1,080,000 & \\\hline \text { Accounts Payable } & & 1,080,000 \\\hline\end{array}$$

question 131

Multiple Choice

A company that uses the perpetual inventory system purchased inventory for $1,080,000 on account with terms of 4/7,n/20.Which of the following correctly records the payment made 15 days after the date of invoice?

• A) \[\begin{array} { | l | c | c | }
• \hline \text { Cash } & 1,080,000 & \\
• \hline \text { Accounts Payable } & & 1,080,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | c | c | }
• \hline \text { Accounts Payable } & 1,080,000 & \\
• \hline \text { Merchandise Inventory } & & 1,080,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | c | c | }
• \hline \text { Accounts Payable } & 1,080,000 & \\
• \hline \text { Cash } & & 1,080,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Accounts Payable } & 1,080,000 & \\
• \hline \text { Merchandise Inventory } & & 43,200 \\
• \hline \text { Cash } & & 1,036,800 \\
• \hline
• \end{array}\]

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Definitions:

Weighted-Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the average cost of all items available for sale during the period.

First-In, First-Out Methods

An inventory valuation method where the first items produced or purchased are the first ones sold, affecting the cost of goods sold and inventory valuation.

First-In, First-Out Method

An inventory valuation method where the first items placed into inventory are the first ones sold.

Weighted-Average Method

An inventory costing method that calculates the cost of inventory based on the average cost of all similar items in the inventory, considering their weight.