Grogan Company purchases inventory on account with a cost of $1,000 and a retail price of $2,000.Grogan Company uses the perpetual inventory method.What journal entry is required on the date of purchase?

Question

Quizplus · Accepted Answer

The journal entry required on the date of purchase under the perpetual inventory method is to debit Inventory for the cost of the inventory purchased ($1,000) and credit Accounts Payable for the amount owed ($1,000). Hence, option C is the correct answer. Option A is incorrect because it only debits Purchases without crediting the Accounts Payable account. Option B is incorrect because it assumes that the purchase was made with cash instead of on account. Option D is incorrect because it credits Purchases instead of debiting Inventory.

Grogan Company Purchases Inventory on Account with a Cost of $1,000