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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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( Appendix 6.4) Which of the following statements is true for a company that uses a periodic inventory system?

a. The purchase of inventory requires a debit to Inventory.

b. The return of defective inventory requires a debit to Purchase Returns and Allowance.

c. The payment of a purchase within the discount period requires a credit to Purchase Discounts.

d. Any amounts paid for freight are debited to Inventory.

To determine

Concept introduction:

Periodic Inventory System:

The periodic inventory system records and updates the inventory at the end of a particular period. The inventory balance is not updated after each transaction and it is updated periodically.

To choose:

The correct statement about the company using the periodic inventory system.

Explanation

Explanation for Correct answer:

c. Under the periodic inventory system the payment of purchase within the discount period requires a credit to the purchase discount

Hence it is the correct answer.

Explanation for incorrect answers:

a. Under the periodic inventory system the purchase of inventory requires a debit to purchase account...

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