A beginning inventory of $75,000 is removed from the merchandise inventory account by
A) debiting $75,000 to Merchandise Inventory.
B) crediting $75,000 to Merchandise Inventory.
C) debiting $75,000 to Purchases.
D) crediting $75,000 to Income Summary.

Question

Quizplus · Accepted Answer

A beginning inventory is an asset and is part of the merchandise inventory account. When it is removed, it should be credited to the merchandise inventory account to reflect the decrease in the inventory's value. Debiting Merchandise Inventory would increase the balance, which is incorrect. Debiting Purchases would imply that a new purchase was made, which is also incorrect. Crediting Income Summary would not be appropriate because it is a temporary account used for closing entries.

A Beginning Inventory of $75,000 Is Removed from the Merchandise