Assume that a perpetual inventory system is in use.Which of the following statements regarding the journal entries prepared is correct?
A)"Freight-out" or delivery costs associated with sales should be included in Cost of Goods Sold.
B)When a company receives payment from a customer for a sale,Cash is debited and Accounts Payable is credited.
C)When a company grants an allowance to a customer,Inventory is credited when using a perpetual inventory system.
D)When a customer returns inventory,the seller debits Sales Revenue (or Sales Returns & Allowances)under a perpetual inventory system.

Question

Quizplus · Accepted Answer

Freight-out is a selling expense on the income statement.When a company receives payment for a sale,Cash is debited and Accounts Receivable is credited.When a company grants an allowance,Sales Revenue & Allowances is debited and Accounts Receivable is credited.If the inventory is returned,there are two entries.First,Sales Returns & Allowances is debited and Accounts Receivable is credited.Second,Inventory is debited and Cost of Goods Sold is credited.

Assume That a Perpetual Inventory System Is in Use