Company uses the periodic inventory method and offers the following information: At the end of the period, the company does an inventory count and finds $16,000 of inventory on hand.
Which of the following T-accounts accurately represents the first three closing entries?

Question

Company uses the periodic inventory method and offers the following information:  At the end of the period, the company does an inventory count and finds $16,000 of inventory on hand.
Which of the following T-accounts accurately represents the first three closing entries?

Quizplus · Accepted Answer

The first three closing entries for a company using the periodic inventory method are: 
1. Debit Cost of Goods Sold, credit Merchandise Inventory for the cost of goods sold
2. Debit Sales Revenue, credit Sales Returns and Allowances for any returns or allowances
3. Debit Sales Returns and Allowances, credit Merchandise Inventory for the amount of returns or allowances

Option D accurately represents these entries, with debits to Cost of Goods Sold and Sales Returns and Allowances, and credits to Merchandise Inventory and Sales Revenue. The other options do not have the correct combination of debits and credits for these entries.

Company Uses the Periodic Inventory Method and Offers the Following