Question

Clean123 Inc. purchased 20 industrial floor cleaners for $200 each. It pays 50% of its purchase with cash and puts the rest on credit. How will this transaction be recorded, assuming the company uses a perpetual system

Answer 1

Answer:

See explanation below:

Explanation:

Items purchased        -   20 industrial floor cleaners

Price for each             -    $200

Total cost of purchases    -    200 x 20 = $4000

The firm pays 50% of this amount in cash and puts the other 50% on credit. In other words, the firm pays $2,000 in cash and owes $2,000.

In a perpetual inventory system, the transaction will be recorded thus:

NAME OF ACCOUNT     DEBIT     CREDIT

Inventory:                         4,000

Accounts Payable:                           2,000

The inventory row shows the cost of all purchased inventory.

The accounts payable row shows the money paid for the goods.

Answer 2

Answer:

B

Explanation:

The total cost of the machines is 4k. When half of it's paid 2k would be immediately debited in the cash paid then the remain balance would be put onto credit laving 2k to go on company credit.