Parker Company Uses the Perpetual Inventory System

Parker Company uses the perpetual inventory system. It bought merchandise on account from Beige Inc., invoice no. 342, $20,000; terms 1/15, n/30; dated June 25; FOB San Francisco, freight prepaid and added to the invoice, $1,800 (total $21,800) . Which of the following journal entries records this purchase transaction?

A) A debit to Merchandise Inventory of $23,600, a credit to Accounts Payable of $23,600
B) A debit to Merchandise Inventory of $21,800, a credit to Accounts Payable of $21,800
C) A debit to Merchandise Inventory of $20,000, a debit to Freight of $1,800, a credit to Accounts Payable of $21,800
D) A debit to Cost of Goods Purchased of $20,000, a debit to Freight Out of $1,800, a credit to Accounts Payable of $21,800

Correct Answer:

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