BetterBuy uses a perpetual inventory system.BetterBuy sells a computer from inventory for $599 on credit.BetterBuy originally bought the computer from IBM for $395.What journal entry (entries)will BetterBuy prepare to record the sale?
A) Debit Cash and credit Sales Revenue for $599; debit Cost of Goods Sold and credit Inventory for $395
B) Debit Accounts Receivable for $599, credit Inventory for $395, and credit Gross Profit for $204
C) Debit Accounts Receivable and credit Sales Revenue for $599; debit Cost of Goods Sold and credit Inventory for $395
D) Debit Inventory for $395, debit Cost of Goods Sold for $204, and credit Accounts Receivable for $599

Question

Quizplus · Accepted Answer

When BetterBuy sells a computer from inventory for $599 on credit, it needs to record the transaction in its accounting records. Since it uses a perpetual inventory system, it needs to debit the Accounts Receivable account and credit the Sales Revenue account for $599. At the same time, it needs to reduce its inventory by the cost of the computer, which was originally purchased from IBM for $395. Therefore, BetterBuy must debit the Cost of Goods Sold account and credit the Inventory account for $395. This choice correctly records the sale and the related cost of goods sold, as well as the increase in accounts receivable and sales revenue.

BetterBuy Uses a Perpetual Inventory System