The Wilson Company purchased $44,000 of merchandise from the Poole Wholesale Company. Wilson also paid $3,000 for freight costs to have the goods shipped to its location. The company uses a perpetual inventory system. Which of the following summarizes the effects of the journal entries required to record these transactions for The Wilson Company? a. Total debits to the inventory account would be $47,000. b. Total debits to the inventory account would be $44,000. c. Transportation-in would be debited for $3,000. d. Total debits to the inventory account would be $41,000.

Question

Business

Vincent

30 August, 04:01

The Wilson Company purchased $44,000 of merchandise from the Poole Wholesale Company. Wilson also paid $3,000 for freight costs to have the goods shipped to its location. The company uses a perpetual inventory system. Which of the following summarizes the effects of the journal entries required to record these transactions for The Wilson Company? a. Total debits to the inventory account would be $47,000. b. Total debits to the inventory account would be $44,000. c. Transportation-in would be debited for $3,000. d. Total debits to the inventory account would be $41,000.

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Answers (1)

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Herring · Answer 1

a. Total debits to the inventory account would be $47,000

Explanation:

According to IAS 2 inventories which is the accounting standard for Inventories under IFRS, Inventory should initially be recognized at the cost (which includes the cost of the item and other associated cost such as freight).

When inventory is purchased, the entries required are debit Inventories and Credit Cash.

Total inventory cost

= $44,000 + $3,000

= $47,000