Davis Hardware Company uses a perpetual inventory system. How should Davis record the sale of merchandise, costing $620 and sold for $960 on account?

Question

Quizplus · Accepted Answer

Since Davis Hardware Company uses a perpetual inventory system, the cost of goods sold must be recorded at the same time as the sale. Therefore, the entry to record the sale of merchandise on account would be:
Accounts Receivable: $960
    Sales Revenue: $960
Cost of Goods Sold: $620
    Inventory: $620
Option B is the only one that includes both the sales revenue and cost of goods sold accounts, as well as the correct amounts for both.

Davis Hardware Company Uses a Perpetual Inventory System