Question

question 3 of 7
a company purchases merchandise using cash for $1,100. what journal entry is used to record this transaction, assuming the company uses a perpetual inventory system?
select an answer from the options below.
a dr. merchandise inventory $1,100 cr. cash $1,100
b dr. purchases $1,100 cr. cash $1,100
c dr. merchandise inventory $1,100 cr. accounts payable $1,100

Explanation:

In a perpetual inventory system, when merchandise is purchased, the Merchandise Inventory account is debited (as inventory increases) and the Cash account is credited (as cash is paid out). Option A correctly reflects this. Option B uses the "Purchases" account which is used in a periodic inventory system. Option C credits Accounts Payable which is for credit purchases, not cash purchases.

Answer:

A. Dr. Merchandise Inventory $1,100 Cr. Cash $1,100