Bally Boutique uses a perpetual inventory system when recording its purchases and sales of inventory. The business sells $6,000 of goods to charge account customers and the goods originally cost Bally, $3,000. The entry to record the sale would include:
A)a debit to Merchandise Inventory for $3,000 and a credit to Cost of Goods Sold for $3,000
B)a debit to Accounts Receivable for $3,000 and a credit to Sales for $3,000
C)a debit to Cost of Goods Sold for $3,000 and a credit to Merchandise Inventory for $3,000
D)a debit to Sales for $6,000 and a credit to Merchandise Inventory for $6,000

Question

Quizplus · Accepted Answer

The entry to record the sale would involve removing the cost of the goods sold from merchandise inventory and recognizing it as an expense in the form of Cost of Goods Sold. Therefore, option C is the correct answer. Option A would decrease the inventory twice, which is incorrect. Option B would record only the revenue and not the cost of goods sold. Option D would overstate the revenue by not accounting for the cost of goods sold.

Bally Boutique Uses a Perpetual Inventory System When Recording Its