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.