A company that uses the perpetual inventory system purchased 500 pallets of industrial soap for $10,000 and paid $750 for the freight in.The company sold the whole lot to a supermarket chain for $13,000 on account.The company uses the specific-identification method of inventory costing.Which of the following entries correctly records the cost of sale?

Question

Quizplus · Accepted Answer

The specific-identification method involves identifying which specific units of inventory were sold, and then assigning the cost of those specific units to the cost of goods sold. In this case, all 500 pallets of industrial soap were sold to the supermarket chain, so the cost of goods sold should be the total cost of those 500 pallets. 
The cost of goods sold can be calculated by adding the purchase cost and the freight cost: 
$10,000 (purchase cost) + $750 (freight cost) = $10,750 
Therefore, the correct entry to record the cost of sale is:
Debit: Cost of goods sold $10,750
Credit: Inventory $10,750 
Choice B correctly reflects this entry.

A Company That Uses the Perpetual Inventory System Purchased 500 Cost of sales 10,000 Inventory 10,000\begin{array} { | c | l | l | } \hline \text { Cost of sales } & 10,000 & \\\hline \text { Inventory } & & 10,000 \\\hline\end{array} Cost of sales Inventory ​10,000​10,000​​

A Company That Uses the Perpetual Inventory System Purchased 500 $\begin{array} { | c | l | l | } \hline \text { Cost of sales } & 10,000 & \\\hline \text { Inventory } & & 10,000 \\\hline\end{array}$