A company purchased inventory on account.If the perpetual inventory system is used,which of the following choices accurately reflects how the purchase affects the company's financial statements?

Question

Quizplus · Accepted Answer

Purchasing merchandise inventory on account increases assets (merchandise inventory) and increases liabilities (accounts payable). Because product costs are expensed when inventory is sold, not when the goods are purchased, the event does not affect net income. Since the inventory was purchased on account, it does not affect the statement of cash flows.

A Company Purchased Inventory on Account