Under the perpetual inventory system, what is the correct entry for the credit purchase of 20 electric guitars at $250 per guitar plus GST of $25 each?

Question

Quizplus · Accepted Answer

The correct entry for a credit purchase of inventory under the perpetual inventory system includes debiting the inventory account for the cost of the purchase (20 guitars at $250 each totals $5000) and debiting the GST outlays (or similar tax account) for the tax on the purchase ($25 per guitar for 20 guitars totals $500), with a corresponding credit to accounts payable for the total amount owed ($5500). This reflects the increase in inventory and GST outlays and the increase in liabilities (accounts payable).

Under the Perpetual Inventory System, What Is the Correct Entry