Asked by Deneatra Caesar on May 16, 2024
Verified
Under the perpetual system, when merchandise is sold, the journal entry would include a:
A) debit to Merchandise Inventory; a credit to Accounts Payable or Cash.
B) debit to Cost of Goods Sold; a credit to Merchandise Inventory.
C) debit to Accounts Receivable or Cash and a credit to Sales.
D) Both B and C are correct.
Perpetual System
An inventory management system that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.
Merchandise Inventory
Products that a retailer, wholesaler, or distributor has in stock and available for sale.
Cost of Goods Sold
Represents the direct costs attributable to the production of the goods sold by a company, including material and labor costs.
- Familiarize oneself with the process of logging sales, incorporating the cost of goods sold, in the context of both periodic and perpetual inventory frameworks.
- Differentiate the accounts implicated in a perpetual inventory system.
Verified Answer
KK
Kurtis KlingbeilMay 16, 2024
Final Answer :
D
Explanation :
Under the perpetual inventory system, when merchandise is sold, two journal entries are made: one to record the sale (debit to Accounts Receivable or Cash; credit to Sales) and another to record the cost of the merchandise sold (debit to Cost of Goods Sold; credit to Merchandise Inventory). Therefore, both B and C are correct.
Learning Objectives
- Familiarize oneself with the process of logging sales, incorporating the cost of goods sold, in the context of both periodic and perpetual inventory frameworks.
- Differentiate the accounts implicated in a perpetual inventory system.