Question 21:

A company purchases inventory worth $25,000 on credit from a supplier.

Requirements:

1. Record the journal entry to recognize the purchase of inventory.

2. Post the journal entry to the Inventory account in the ledger.

3. Calculate the total amount of inventory purchased on credit.

4. Analyze how this transaction affects the company's balance sheet.

5. Discuss the implications of purchasing inventory on credit for the company's working capital.