Clark Incorporated purchased iron from Garret Industries. The purchase cost $54,730 with freight costs of $680 and a purchase discount of $5,473. If Clark Incorporated uses a periodic system of inventory, which accounts will Clark Incorporated use to account for this purchase?

See explanation

Explanation:

Periodic Inventory system determines the inventory at the end of the accounting period while a perpetual inventory system determines the inventory concurrently. As Clark uses a periodic inventory system, the journal entry to record the purchase of iron -

Debit Purchase $54,730

Credit Accounts payable $54,730

Note: Purchase iron from garret industries

Debit Freight-in $680

Credit Cash $680

Note: Paid Freight costs.

Debit Accounts payable $54,730

Credit Cash $49,257

Credit Purchase discounts $5,473

Note: Paid the bill and got the discount.