A company that uses the perpetual inventory system purchased 500 pallets of industrial soap for $9,000 and paid $780 for the freight-in.The company sold the whole lot to a supermarket chain for $12,000 on account.The company uses the specific-identification method of inventory costing.Which of the following entries correctly records the cost of goods sold?

Question

Quizplus · Accepted Answer

Under the specific-identification method, the cost of goods sold is recorded based on the actual cost of the inventory sold. In this case, all 500 pallets were sold to the supermarket chain, and the cost of the inventory sold will be the cost of the 500 pallets purchased for $9,000 plus the freight-in cost of $780, which is a total of $9,780. 
Therefore, the correct entry to record the cost of goods sold is:
Cost of Goods Sold  $9,780
Inventory                $9,780

A Company That Uses the Perpetual Inventory System Purchased 500