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World of Sound is a small retail business that specializes in the sale of top-of-the-line sound systems.This year,the store has begun to carry the Surround Sound manufactured by Carp Co.Thus far,World of Sound has recorded the following transactions involving the Surround Sound

-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? (Assume that World of Sound uses FIFO,meaning that the first goods purchased are the first ones to be sold. )
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

[The following information applies to the questions displayed below.]
World of Sound is a small retail business that specializes in the sale of top-of-the-line sound systems.This year,the store has begun to carry the Surround Sound manufactured by Carp Co.Thus far,World of Sound has recorded the following transactions involving the Surround Sound
 
-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? (Assume that World of Sound uses FIFO,meaning that the first goods purchased are the first ones to be sold. )
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

Quizplus · Accepted Answer

Since the company uses FIFO, the first goods purchased are the first ones to be sold. The cost of goods sold will be the value of the oldest inventory sold. Therefore, the journal entry to record the sale on February 12th would include a debit to the Cost of Goods Sold for $45,750.

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