Cumberland Co. sells $2,000 of inventory to Hancock Co. for cash. Cumberland paid $1,250 for the merchandise. Under a perpetual inventory system, which of the following journal entry(ies) would be recorded?

A) debit Cash, $2,000; credit Inventory, $1,250
B) debit Cash, $2,000; credit Sales, $2,000; and debit Cost of Goods Sold, $1,250; credit Inventory, $1,250
C) debit Cash, $1,250; credit Sales, $1,250
D) debit Accounts Receivable, $2,000; credit Sales, $2,000; and debit Cost of Goods Sold, $1,250; credit Inventory, $1,250

Under perpetual inventory system, the cost of goods sold and inventory are directly affected at the time of sale.

Debit Cash, $2,000; credit Sales, $2,000: This would record the sale amount, but it would not affect the cost of goods sold or inventory.

Debit Cash, $1,250; credit Sales, $1,250: This entry would only record the sale amount and would not account for the cost of goods sold.

Debit Accounts Receivable, $2,000; credit Sales, $2,000; and debit Cost of Goods Sold, $1,250; credit Inventory, $1,250: This option records the sale amount, reduces inventory by its cost, and records the cost of goods sold. However, it assumes that Hancock Co. purchased the inventory on credit, which is not mentioned in the scenario.

Debit Cash, $2,000; credit Sales, $2,000; and debit Cost of Goods Sold, $1,250; credit Inventory, $1,250: This entry records the sale amount, reduces inventory by its cost, and records the cost of goods sold. It accurately reflects that the sale was made for cash.