Spears Company uses the periodic inventory method.On April 15,Spears Company purchased merchandise inventory from Zing Inc.with an invoice price of $70,000 and credit terms of 2/10,n/30.How would Spears Company record this transaction?
A)Debit Merchandise Inventory for $70,000 and credit Cash for $70,000.
B)Debit Merchandise Inventory for $70,000 and credit Accounts Payable for $70,000.
C)Debit Merchandise Inventory for $68,600 and credit Accounts Payable for $68,600.
D)Debit Purchases for $70,000 and credit Accounts Payable for $70,000.
E)Debit Purchases for $68,600 and credit Accounts Payable for $68,600.

Question

Quizplus · Accepted Answer

In a periodic inventory system, purchases are recorded in a temporary account called "Purchases." The invoice price is $70,000, and the discount is not recorded until payment is made. Therefore, the correct entry is to debit Purchases for $70,000 and credit Accounts Payable for $70,000.

Spears Company Uses the Periodic Inventory Method