The Wilson Company purchased $42,000 of merchandise from the Poole Wholesale Company. Wilson also paid $3,500 for freight costs to have the goods shipped to its location. Which of the following statements regarding the necessary entries for the transactions is true? Wilson uses the perpetual inventory system.

- Transportation-in would be debited for $3,500.

- Total debits to the inventory account would be $42,000.

- Total debits to the inventory account would be $3,500.

- Total debits to the inventory account would be $45,500.

The answer is: Total debits to the inventory account would be $45,500.

When perpetual inventory method is used, the recording of inventory is real-time, in which all the received and sold inventories are recorded immediately.

Analyze each statement to identify if it is true or false.

Statement 1 is incorrect. This entry is prepared if the method used is periodic inventory system.

Statement 2 is incorrect. Total debits to inventory account is the sum of cost of inventory and freight costs.

Statement 3 is incorrect. Cost of inventory should be included, not freight costs only.

Statement 4 is the correct answer. Total debits include cost of the inventory and its freight costs ($42,000 + $3,500).