Assuming a periodic inventory system the journal entry to re

Assuming a periodic inventory system, the journal entry to record the purchase on account of $1,070 of merchandise with freight of $150 prepaid and added to the invoice is:

A. Debit purchases $1220; credit accounts payable $1220

B. Debit purchases $1070; debit freight in $150; credit accounts payable $1220

C. Debit accounts receivable $1220; credit sales $1220

D. Debit accounts payable $1220; debit freight in $150; credit purchases $1070

Solution

Answer : B. Debit purchases $1070; debit freight in $150; credit accounts payable $1220.

Explanation : Under periodic inventory system , inventory account is only updated at the end of the period. Any purchase made during the period are debited to purchase account ( for purchase) & fright in account (for freight or transportation charges ) .

Journal Entry.