Use the following information for questions.
Tehran Ltd.uses FIFO to cost its inventory.The following information is available for Tehran's inventory of product # 101:
-Assuming Tehran uses the periodic inventory system, the entry to account for the March 1 purchase is
A)debit Inventory and credit Accounts Payable, $875.
B)debit Purchases and credit Accounts Payable, $875.
C)debit Accounts Payable and credit Purchases, $875.
D)debit Accounts Payable and credit Inventory, $875.

Question

Use the following information for questions.
Tehran Ltd.uses FIFO to cost its inventory.The following information is available for Tehran's inventory of product # 101: 
-Assuming Tehran uses the periodic inventory system, the entry to account for the March 1 purchase is
A)debit Inventory and credit Accounts Payable, $875. 
B)debit Purchases and credit Accounts Payable, $875. 
C)debit Accounts Payable and credit Purchases, $875. 
D)debit Accounts Payable and credit Inventory, $875.

Quizplus · Accepted Answer

In a periodic inventory system, purchases are recorded in a temporary account called "Purchases" rather than directly in the "Inventory" account. Therefore, the correct entry for a purchase is to debit "Purchases" and credit "Accounts Payable".

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