Kristi's pottery sold 250 tiles at $25.00 each to a charge customer, terms 1/10, n/30. The tiles cost Kristi's $10.00 each. Which entry is required to record the inventory adjustment for this transaction under a perpetual system?
A) Debit Inventory for $2,500; credit Tile Sales for $2,500
B) Debit Accounts Receivable for $2,500; credit Inventory for $2,500
C) Debit Cost of Goods Sold for $2,250; debit Purchase Discounts for $250; credit Inventory $2,500
D) Debit Cost of Goods Sold for $2,500; credit Inventory for $2,500

Question

Quizplus · Accepted Answer

Under perpetual inventory system, inventory adjustment is required to be made at the time of sale. The journal entry required to record the inventory adjustment for this transaction would be a debit to Cost of Goods Sold for the cost of the goods sold, and a credit to Inventory for the same amount.

Here, 250 tiles were sold at $25.00 each, making the total sales revenue ($25.00 x 250) $6,250. The cost of 250 tiles at $10.00 each would be ($10.00 x 250) $2,500. Therefore, the entry to record the inventory adjustment would be:

Debit Cost of Goods Sold for $2,500
Credit Inventory for $2,500

Kristi's Pottery Sold 250 Tiles at $25