CONNECT ONLINE ACCESS FOR INTERMEDIATE
10th Edition
ISBN: 9781264798834
Author: SPICELAND
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 8, Problem 8.3Q
The Cloud Company employs a perpetual inventory system and the McKenzie Corporation uses a periodic system. Describe the differences between the two systems in accounting for the following events: (1) purchase of merchandise, (2) sale of merchandise, (3) return of merchandise to supplier, and (4) payment of freight charge on merchandise purchased. Indicate which inventory-related accounts would be debited or credited for each event.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The Cloud Company employs a perpetual inventory system and the McKenzie Corporation uses a periodicbsystem. Describe the differences between the two systems in accounting for the following events: (1) purchase of merchandise, (2) sale of merchandise, (3) return of merchandise to supplier, and (4) payment of freight charge on merchandise purchased. Indicate which inventory-related accounts would be debited or credited for each event.
The Cloud Company employs a perpetual inventory system and the McKenzie Corporation uses a periodic system. Describe the differences between the two systems in accounting for the following events: (1) purchase of merchandise, (2) sale of merchandise, (3) return of merchandise to supplier, and (4) payment of freight charge on merchandise purchased. Indicate which inventory-related accounts would be debited or credited for each event.
Assume that a perpetual inventory system using the NET METHOD is in use. Which of the following statements regarding the journal entries prepared is correct?
A) When a customer returns inventory, the seller debits Customer Refunds Payable.
B) Shipping costs associated with sales with terms FOB, destination should be included in Cost of Merchandise Inventory.
C) When a company receives payment from a customer for a sale, Cash is debited and Accounts Payable is credited.
D) When a company sells merchandise with terms 2/10, n 30, the company will credit Merchandise Inventory for the amount of the discount of 2 percent of sales.
Why is the answer A and not D?
Chapter 8 Solutions
CONNECT ONLINE ACCESS FOR INTERMEDIATE
Ch. 8 - Describe the three types of inventory of a...Ch. 8 - What is the main difference between a perpetual...Ch. 8 - The Cloud Company employs a perpetual inventory...Ch. 8 - The Bockner Company shipped merchandise to Laetner...Ch. 8 - What is a consignment arrangement? Explain the...Ch. 8 - Prob. 8.6QCh. 8 - The Esquire Company employs a periodic inventory...Ch. 8 - Prob. 8.8QCh. 8 - Its common in the electronics industry for unit...Ch. 8 - Explain why proponents of LIFO argue that it...
Ch. 8 - Prob. 8.11QCh. 8 - Describe the ratios used by financial analysts to...Ch. 8 - Prob. 8.13QCh. 8 - Prob. 8.14QCh. 8 - The Austin Company uses the dollar-value LIFO...Ch. 8 - Identify any differences between U.S. GAAP and...Ch. 8 - Determining ending inventory; periodic system ...Ch. 8 - Prob. 8.2BECh. 8 - LIFO method LO84 AAA Hardware uses the LIFO...Ch. 8 - LIFO liquidation LO86 Refer to the situation...Ch. 8 - Prob. 8.11BECh. 8 - Perpetual inventory system; journal entries LO81...Ch. 8 - Prob. 8.2ECh. 8 - Perpetual and periodic inventory systems compared ...Ch. 8 - Prob. 8.5ECh. 8 - Physical quantities and costs included in...Ch. 8 - FASB codification research LO82, LO83 Access the...Ch. 8 - Prob. 8.13ECh. 8 - Prob. 8.14ECh. 8 - Prob. 8.15ECh. 8 - Prob. 8.16ECh. 8 - Prob. 8.19ECh. 8 - Prob. 8.20ECh. 8 - Prob. 8.21ECh. 8 - Prob. 8.23ECh. 8 - Prob. 8.25ECh. 8 - Prob. 8.30ECh. 8 - Prob. 8.31ECh. 8 - Various inventory transactions; journal entries ...Ch. 8 - Prob. 8.3PCh. 8 - Prob. 8.4PCh. 8 - Various inventory costing methods LO81, LO84...Ch. 8 - Prob. 8.6PCh. 8 - Prob. 8.9PCh. 8 - Prob. 8.16PCh. 8 - Prob. 8.1DMPCh. 8 - Real World Case 82 Physical quantities and costs...Ch. 8 - Prob. 8.4DMPCh. 8 - Prob. 8.5DMPCh. 8 - Prob. 8.8DMPCh. 8 - Real World Case 89 Effects of inventory valuation...Ch. 8 - Communication Case 810 Dollar-value LIFO method ...Ch. 8 - Prob. 1CCTCCh. 8 - Prob. 2CCTC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- What is the difference in reporting requirements for customer-returned merchandise in sellable condition under a perpetual inventory system versus a periodic inventory system?arrow_forwardWhich of the following accounts are used when recording the sales entry of a sale on credit? A. merchandise inventory, cash B. accounts receivable, merchandise inventory C. accounts receivable, sales D. sales, cost of goods soldarrow_forwardUnder the periodic inventory system, the ending inventory is entered by debiting Merchandise Inventory and crediting Income Summary.arrow_forward
- Rules of debit and credit for periodic inventory accounts Complete the following table by indicating for A through G whether the proper answer is debit or credit:arrow_forwardThis type of inventory system does not require an entry to Merchandise Inventory until a physical inventory has been taken. a. Periodic inventory system b. Perpetual inventory system c. Merchandise inventory system d. Beginning inventory system e. Ending inventory systemarrow_forwardAssume that the business in Exercise 7-9 maintains a perpetual inventory system. Determine the cost of merchandise sold for each sale and the inventory balance after each sale, assuming the last-in, first-out method. Present the data in the form illustrated in Exhibit 4.arrow_forward
- Under the perpetual inventory system, how does the seller record sales made on account?arrow_forwardWhich of the following describes features of a perpetual inventory system? A. Technology is normally used to record inventory changes. B. Merchandise bought is recorded as purchases. C. An adjusting journal entry is required at year end, to match physical counts to the asset account. D. Inventory is updated at the end of the period.arrow_forwardPerpetual and Periodic Inventory Systems Below is a list of inventory systems options. a. Perpetual inventory system b. Periodic inventory system c. Both perpetual and periodic inventory systems Required: Match each option with one of the following: 1. Only revenue is recorded as sales are made during the period; the cost of goods sold is recorded at the end of the period. 2. Cost of goods sold is determined as each sale is made. 3. Inventory purchases are recorded in an inventory account. 4. Inventory purchases are recorded in a purchases account. 5. Cost of goods sold is determined only at the end of the period by subtracting the cost of ending inventory from the cost of goods available for sale. 6. Both revenue and cost of goods sold are recorded during the period as sales are made. 7. The inventory is verified by a physical count.arrow_forward
- Using the perpetual inventory system, what account is debited when a business finds that its physical count of inventory is greater than the recorded amount?arrow_forwardBrown Inc. records purchases in a purchases journal and purchase returns in the general journal. Record the following transactions using a purchases journal, a general journal, and an accounts payable subsidiary ledger. The company uses the periodic method of accounting for inventory.arrow_forwardUnder the retail inventory method, freight-in would be included in the calculation of the goods available for sale for which of the following?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
College Accounting (Book Only): A Career Approach
Accounting
ISBN:9781337280570
Author:Scott, Cathy J.
Publisher:South-Western College Pub
IAS 29 Financial Reporting in Hyperinflationary Economies: Summary 2021; Author: Silvia of CPDbox;https://www.youtube.com/watch?v=55luVuTYLY8;License: Standard Youtube License