If World of Sound uses a perpetual inventory system, the journal entry to record the sale on February 12th would include which of the following?
A) A debit to the Cost of Goods Sold for $45,750.
B) A credit to the Cost of Goods Sold for $45,750.
C) A credit to Purchases for $45,750.
D) A debit to Inventory for $45,750

Question

Quizplus · Accepted Answer

Since World of Sound uses the perpetual inventory system, the journal entry to record the sale on February 12th should include the cost of the goods sold. Therefore, the journal entry should debit the Cost of Goods Sold account and credit the Inventory account. The amount of the debit should be equal to the cost of the goods sold, which is $45,750. A credit to the Cost of Goods Sold account would reduce the balance of this account, which is not correct. A credit to Purchases would suggest that the sale is being recorded as a purchase, which is not correct either. A debit to Inventory would increase the balance of this account, which is not correct as inventory has been sold.

If World of Sound Uses a Perpetual Inventory System, the Journal