A company sold merchandise with a cost of $217 for $390 on account.The seller uses the perpetual inventory system.The entry to record the cost of merchandise sold would include ________.
A) a debit to Sales Revenue and a credit to Cash for $390
B) a debit to Cash and a credit to Sales Revenue for $390
C) a debit to Cost of Goods Sold and a credit to Merchandise Inventory for $217
D) a debit to Merchandise Inventory for $217 and a credit to Cost of Goods Sold for $217

Question

Quizplus · Accepted Answer

The cost of merchandise sold is recorded by debiting Cost of Goods Sold and crediting Merchandise Inventory. This reduces the amount of inventory on hand and reflects the cost of goods sold during the period. Option A and B are not correct as they do not reflect the cost of goods sold. Option D is incorrect as it records the opposite effect (i.e. increases inventory instead of reducing it).

A Company Sold Merchandise with a Cost of $217 for $390