A company using the periodic inventory system to record the reduction of inventory to market would record the following journal entry to close beginning inventory using the direct method:

Question

Quizplus · Accepted Answer

The statement is incorrect because the periodic inventory system does not use the direct method to record the reduction of inventory to market. Instead, it uses the lower of cost or market method to adjust the inventory balance to its market value. The journal entry to close beginning inventory in this case would simply be a debit to Cost of Goods Sold and a credit to Beginning Inventory.

A Company Using the Periodic Inventory System to Record the Reduction