Question

A Moving to another question will save this response. Question 36 2 points When a company purchases inventory for cash, using the perpetual method the transaction may be recorded by the buyer with the following entry A. debit Cash credit Inventory B. debit Inventory credit Cash C. debit Inventory credit Cash Discounts D. debit Inventory credit Purchases

Answer 1

The correct journal entry for purchasing inventory for cash using the perpetual inventory system is to debit Inventory and credit Cash, representing an increase in inventory and a decrease in cash.

Step-by-step explanation:

When a company purchases inventory for cash using the perpetual inventory system, the correct journal entry to record the transaction by the buyer would be to debit Inventory and credit Cash. This entry reflects that the inventory on hand has increased (debit) while the cash on hand has decreased due to the payment (credit). In this case, options involving Cash Discounts or Purchases are not applicable, as cash discounts are typically recorded when they are taken, and the Purchases account is used in a periodic inventory system rather than a perpetual one.

Answer 2

In the perpetual inventory method, a purchase of inventory for cash is recorded by debiting Inventory and crediting Cash to reflect the changes in the company's assets.

Step-by-step explanation:

When a company purchases inventory for cash, using the perpetual inventory method, the transaction is recorded by the buyer with the following entry: debit Inventory and credit Cash. This journal entry reflects an increase in inventory and a decrease in cash. It is essential to maintain accurate records of inventory for financial reporting and operational purposes, and the perpetual method aids in providing real-time data on inventory levels. Therefore, option B is correct answer.