A company that uses the perpetual inventory system sold goods to a customer on account for $2,000. The cost of the goods sold was $1,000. Which of the following journal entries correctly records this transaction?

Question

Quizplus · Accepted Answer

Choice D correctly records the sale on account with an increase in Accounts Receivable and an increase in Sales Revenue. It does not address the cost of the goods sold, which should be recorded separately in a different journal entry. Therefore, the journal entry for the cost of the goods sold should be recorded separately as shown in the following entry:

$$\begin{array} { | c | r | r | } 
\hline \text { Cost of Goods Sold } & 1,000 & \
\hline \text { Merchandise Inventory } & & 1,000 \
\hline
\end{array}$$

Option A is incorrect because it records the entire transaction as an increase in Cost of Goods Sold and an increase in Sales Revenue.

Option B is incorrect because it records an increase in Merchandise Inventory, which should only be recorded at the time of purchase from the supplier.

Option C is incorrect because it records the sale as an increase in Cash, which is not applicable since the customer purchased on account.

A Company That Uses the Perpetual Inventory System Sold Goods