Question

Using a perpetual inventory system, how should a company record the sale of inventory costing $520 for $950 on account? 1. Inventory 520 Cost of Goods Sold 520 Sales Revenue 950 Accounts Receivable 950 2. Accounts Receivable 950 Sales Revenue 950 Cost of Goods Sold 520 Inventory 520 3. Inventory 520 Gain 430 Sales Revenue 950 4. Accounts Receivable 950 Sales Revenues 520 Gain 430

Answer 1

Answer

• Complete set of entries would be:

Accounts title	Debit	Credit
Accounts receivables	$950
Sales		$950
(to record sale)
Cost of Goods Sold	$520
Inventory		$520
(to record the cost)

• Correct Answer = Option #2
  Debit: Accounts Receivable 950
  Credit:Sales Revenue 950
  Debit: Cost of Goods Sold 520
  Credit: Inventory 520