Using a perpetual inventory system, how should a company record the sale of inventory costing $620 for $960 on account? 1. Inventory 620 Cost of Goods Sold 620 Sales Revenue 960 Accounts Receivable 960 2. Accounts Receivable 960 Sales Revenue 960 Cost of Goods Sold 620 Inventory 620 3. Inventory 620 Gain 340 Sales Revenue 960 4. Accounts Receivable 960 Sales Revenues 620 Gain 340

Question

Business

Deon Roach

6 July, 19:06

Using a perpetual inventory system, how should a company record the sale of inventory costing $620 for $960 on account? 1. Inventory 620 Cost of Goods Sold 620 Sales Revenue 960 Accounts Receivable 960 2. Accounts Receivable 960 Sales Revenue 960 Cost of Goods Sold 620 Inventory 620 3. Inventory 620 Gain 340 Sales Revenue 960 4. Accounts Receivable 960 Sales Revenues 620 Gain 340

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Elian Richmond · Answer 1

2. Accounts Receivable $960 Sales Revenue $960 Cost of Goods Sold $620 Inventory $620

Explanation:

The perpetual inventory system is one in which the balance of inventory in the account is adjusted immediately there is a purchase or a sale of inventory. When inventory is sold, two actions are required under this system.

Inventory sold is derecognized from the inventory account

This is done by debiting the cost of goods sold account and crediting the inventory account with the cost of the item sold.

Revenue is recognized

This is done by crediting inventory with the amount of sale (received from or agreed with the customer) and debiting cash or accounts receivables.