Asked by OLUSEGUN ADELEKE on May 06, 2024
Verified
The journal entry to record the purchase of inventory under the perpetual system includes:
A) a debit to Cost of Goods Sold and a credit to Merchandise Inventory.
B) a debit to Merchandise Inventory and a credit to Accounts Payable or Cash.
C) a debit to Accounts Receivable or Cash and a credit to Sales.
D) Both A and C are correct.
Perpetual System
An inventory system that continuously tracks inventory levels and cost of goods sold in real-time.
Merchandise Inventory
The total value of a company's goods held for sale to customers in the ordinary course of business.
Cost of Goods Sold
Direct costs attributable to the production of the goods sold by a company, including materials and labor.
- Understand the journal entries associated with the purchase and return of inventory under the perpetual inventory system.
Verified Answer
TA
thumula abhinayMay 13, 2024
Final Answer :
B
Explanation :
Under the perpetual inventory system, the purchase of inventory is recorded by debiting Merchandise Inventory and crediting Accounts Payable or Cash, reflecting the increase in inventory and the corresponding increase in liability or decrease in cash.
Learning Objectives
- Understand the journal entries associated with the purchase and return of inventory under the perpetual inventory system.