Question

Assume that Widgets, Inc. uses a perpetual specific identification inventory system. During the period, it sold 3 units on credit to one customer. The sale included one item from the beginning inventory and 2 items from the May 5 purchase. Demonstrate the journal entry required to record the sale and the cost of the sale by selecting all of the correct items below. (Check all that apply.)

Jan 1 Beginning Inventory 10 @ $12
May 5 Purchase 10 @ $15
Aug 8 Sale 3 units x $60 each

a. Cost of Goods Sold is debited for $42
b. Purchases is credited for $42
c. Sales is debited for $180
d. Merchandise Inventory is credited for $42
e. Accounts Receivable is debited for $180
f. Merchandise Inventory is credited for $180
g. Sales is credited for $180
h. Accounts Receivable is credited for $180
i. Cost of Goods Sold is debited for $180

Answer 1

Answer:

a. Cost of Goods Sold is debited for $42

d. Merchandise Inventory is credited for $42

e. Accounts Receivable is debited for $180

g. Sales is credited for $180

Explanation:

Under the Perpetual method two entries will be made .

Sr. No                             Accounts                    Dr.                  Cr.

1.                     Accounts Receivable             $ 180

                                 Sales                                                   $  180

2.                 Cost Of Goods Sold                $ 42

                         Merchandise Inventory                              $ 42

The perpetual inventory system continually updates accounting records for merchandising transactions - specifically for those records of inventory available for sale and inventory sold.