When Purchases of Merchandise Are Made on Account with a Perpetual

question 245

Multiple Choice

When purchases of merchandise are made on account with a perpetual inventory system, the transaction is recorded with which entry?

• A) debit Accounts Payable; credit Inventory
• B) debit Inventory; credit Accounts Payable
• C) debit Inventory; credit Cash Discounts
• D) debit Inventory; credit Purchases

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Definitions:

Laspeyres Price Index

A price index calculated by taking the ratio of the total cost of purchasing a set of goods at current prices to the cost of purchasing the same set of goods at base period prices.

Consumptions

The act of using goods and services to satisfy wants and needs, including everything from essentials like food and clothing to luxury items.

Base Year

A reference year used in economic indices and statistical analyses to facilitate the comparison of data over time.

Utility Function

A mathematical representation of how different bundles of goods or services are ranked according to their utility or satisfaction to a consumer.