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15 February, 19:21

The Wilson Company purchased $35,000 of merchandise from the Poole Wholesale Company. Wilson also paid $2,800 for freight costs to have the goods shipped to its location. Which of the following statements regarding the necessary entries for the transactions is true? Wilson uses a perpetual inventory system.

A. Total debits to the inventory account would be $37,800.

B. Total debits to the inventory account would be $35,000.

C. Transportation-in would be debited for $2,800.

D. Total debits to the inventory account would be $2,800

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  1. 15 February, 21:18
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    Option A, total debits to the inventory account would be $37,800, is correct

    Explanation:

    The cost of the merchandise inventory to Wilson Company is the cost of the inventory purchased and the freight-in cost.

    In other words, the amount to be recognized in merchandise inventory account is the sum of both amounts i. e $35,000+$2800=$37,800

    This would be debited to merchandise inventory and $2,800 would be credited to the cash account while $35,000 is credited to accounts payable
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