Question

Abbott Company purchased $8,500 of merchandise inventory on account. Abbott uses the perpetual inventory method. How does this transaction affect the financial statements?

Answer 1

This transaction will affect the financial statement by: Increase inventory and increase accounts payable.

Financial statement:

Assuming the company purchased merchandise inventory on account of the amount of  $8,500 using  the perpetual inventory method the effect of the transaction on the financial statement is: Inventory will increase by $8,500 and accounts payable will increase by $8,500.

The company inventory will increase due to the purchase they made while the company accounts payable will increase because the company purchased the goods on credit which simply means that they are yet to pay their suppliers.

Inconclusion this transaction will affect the financial statement by: Increase inventory and increase accounts payable.

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