Under the Periodic Inventory System, What Is the Correct Entry

question 60

Multiple Choice

Under the periodic inventory system, what is the correct entry to record the cost of the sale of a dining suite sold to a customer for $1650 including 10% GST? (The dining suite was originally purchased on credit for $990 including GST of $90) .

• A) DR Purchases $1650; CR Sales $1650
• B) DR Purchases $900; CR Inventory $900
• C) DR Cost of sales $900; CR Inventory $900
• D) The cost of each sale is not recorded under the periodic inventory system

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Definitions:

Static Budget

A budget that does not change or adapt with variations in sales volume or business activity levels, typically set for a specific period.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity.

Direct Materials

Direct materials refer to raw materials that are directly used in the production of goods, readily traceable to the finished product.

Variable Utilities

A classification of utility costs that change in relation to production volume or operational activity.