A company that uses the perpetual inventory system sold goods for $1,000 to a customer on account. The company had purchased the inventory for $400. Which of the following journal entries correctly records the cost of goods sold?

Question

Quizplus · Accepted Answer

Under the perpetual inventory system, cost of goods sold is recorded at the time of sale, and the journal entry should reflect this. Therefore, the correct journal entry would be to debit Cost of Goods Sold for the cost of the inventory sold (in this case $400) and credit Merchandise Inventory for the same amount. Option A does not record the value of the sale on the sales revenue account, which is incorrect. Option B debits the wrong account and does not reflect the value of the sale on the sales revenue account. Option D records the sale value (in the sales revenue account) but does not account for the cost of goods sold.

A Company That Uses the Perpetual Inventory System Sold Goods Cost of Goods Sold 400 Sales Revenue400\begin{array} { | c | r | r | } \hline \text { Cost of Goods Sold } & 400 & \\\hline \text { Sales Revenue} & &400 \\\hline\end{array} Cost of Goods Sold Sales Revenue​400​400​​

A Company That Uses the Perpetual Inventory System Sold Goods $\begin{array} { | c | r | r | } \hline \text { Cost of Goods Sold } & 400 & \\\hline \text { Sales Revenue} & &400 \\\hline\end{array}$