Part of the journal entry to record the cost of an item for $28 that sold for $42 cash under the perpetual inventory system is:
A)debit Sales, $42; credit Cost of Goods Sold, $28; credit Cash, $14.
B)debit Cost of Goods Sold, $42; sales, $42.
C)debit Cash, $42; credit Inventory $42.
D)debit Cost of Goods Sold $28; credit Inventory, $28.

Question

Quizplus · Accepted Answer

Under the perpetual inventory system, the cost of goods sold is recorded at the time of each sale. Therefore, the entry would involve debiting the cost of goods sold account for the cost of the item sold ($28) and crediting the inventory account for the same amount ($28). The cash received ($42) is recorded by debiting the cash account for that amount and crediting the sales account for the same amount. Therefore, the correct entry is:
Debit Cost of Goods Sold $28
Credit Inventory $28
Debit Cash $42
Credit Sales $42

Part of the Journal Entry to Record the Cost of an Item