With a perpetual inventory system,assets and stockholders' equity increase by the amount of the gross margin when inventory is sold.(Consider the effects of both parts of this event. )

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When a perpetual inventory system is used,recording the sale increases assets (cash or accounts receivable)and stockholders' equity (retained earnings)by the selling price of the inventory.Sales revenue and net income increase by the same amount.Recording the cost of the merchandise sold decreases assets (merchandise inventory)and stockholders' equity (retained earnings)by the cost of the inventory.The expense (cost of goods sold)increases and net income decreases by that same amount.The net effect on assets and stockholders' equity is an increase to each by the amount of the gross margin (or the selling price minus the cost of the inventory sold).

With a Perpetual Inventory System,assets and Stockholders' Equity Increase by the Amount