The ending merchandise inventory (using the periodic system) is placed on the books by an adjusting entry
A) debiting Merchandise Inventory and crediting Sales.
B) debiting Income Summary and crediting Merchandise Inventory.
C) debiting Merchandise Inventory and crediting Income Summary.
D) debiting Purchases and crediting Merchandise Inventory.
E) debiting Merchandise Inventory and crediting Purchases.

Question

Quizplus · Accepted Answer

The ending merchandise inventory is an asset and should be recorded by debiting Merchandise Inventory. Since the periodic system is used, the inventory will be adjusted by taking a physical count at the end of the period. The adjusting entry to record this inventory should increase the value of the asset and decrease the value of the expense. Therefore, the entry should debit Merchandise Inventory and credit Income Summary. This will increase the value of the inventory and decrease the value of the cost of goods sold, which is included in the Income Summary account.

The Ending Merchandise Inventory (Using the Periodic System) Is Placed