A company uses the perpetual inventory method. Which of the following entries would be made to record a $1,200 sale of merchandise on account? The merchandise cost the company $800.
A) The accounting entry would be a $1,200 debit to Cost of goods sold and a $1,200 credit to Sales revenue.
B) The accounting entry would be a $800 debit to Cost of goods sold and a $800 credit to Inventory.
C) The accounting entry would be a $1,200 debit to Accounts receivable and a $1,200 credit to Sales revenue.
D) Both B and C would be necessary to record the sale.

Question

Quizplus · Accepted Answer

Under the perpetual inventory method, two entries are necessary for a sale: one to record the sale itself (debit Accounts Receivable, credit Sales Revenue) and another to record the cost of the goods sold (debit Cost of Goods Sold, credit Inventory). Therefore, both B and C are correct.

A Company Uses the Perpetual Inventory Method