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22.07.2022 - 17:31

Under the perpetual inventory system, in addition to making the entry to record a sale, a company would a. debit Inventory and credit Cost of Goods Sold. b. debit Cost of Goods Sold and credit Purchases. c. debit Cost of Goods sold and credit Inventory. d

Question:

Under the perpetual inventory system, in addition to making the entry to record a sale, a company would:

a. debit Inventory and credit Cost of Goods Sold.

b. debit Cost of Goods Sold and credit Purchases.

c. debit Cost of Goods sold and credit Inventory.

d. make no additional entry until the end of the period.

Answers (1)

Neva April 11, 2023 в 20:09

The answer is (c) debit Cost of Goods sold and credit Inventory. The perpetual inventory system constantly tracks inventory levels and cost of goods sold. When a sale occurs, the cost of goods sold must be recorded, and inventory must be reduced. Therefore, the company would debit Cost of Goods Sold to record the expense of the goods sold, and credit Inventory to reduce the inventory level. This maintains the accuracy of the perpetual inventory record in real-time. Options (a) and (b) do not properly reflect the reduction of inventory and the cost of goods sold, and option (d) would not maintain an accurate record of inventory levels and cost of goods sold.

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