Garfunkle Company had the following four transactions during January 2012:

-Refer to Exhibit 7-1.Given the information above,with the perpetual inventory method,the entry to record the January 5 transaction would include

Question

Garfunkle Company had the following four transactions during January 2012:
 
-Refer to Exhibit 7-1.Given the information above,with the perpetual inventory method,the entry to record the January 5 transaction would include

Quizplus · Accepted Answer

The perpetual inventory method requires that the inventory account be updated after each transaction. The January 5 transaction is a sale of inventory, so the inventory account must be decreased by the cost of the goods sold. The cost of goods sold is $1,500, so the inventory account will be credited for $1,500. The sale of inventory also results in a receivable from the customer, so the accounts receivable account will be debited for $2,500. Finally, the cost of goods sold must be recorded in the income statement, so the cost of goods sold account will be debited for $1,500.

Garfunkle Company Had the Following Four Transactions During January 2012