47) A company that uses the perpetual inventory system sold goods to a customer

Question

47) A company that uses the perpetual inventory system sold goods to a customer on account for $2,100. The cost of the goods sold was $1,050. Which of the following journal entries correctly records this transaction? A) Cost of Goods Sold 2,100 Sales Revenue 2,100 2,100 B) Accounts Receivable Sales Revenue 2,100 Costs of Goods Sold 1,050 Merchandise Inventory 1,050 CAccounts Receivable 2,100 Cash 2,100 Costs of Goods Sold 1,050 Merchandise Inventory 1,050 D) Merchandise Inventory Costs of Goods Sold 2,100 2,100

Explanation / Answer

Answer is option (B)

Explanation;

As we know that under perpetual inventory system two separate journal entries are made. First entry for sale and second entry for recording cost of goods sold & inventory. So on this basis option (A) and (D) are incorrect.

Now look at other two options (B) and (C). As it is clearly given in the question that goods are sold on account that is why we can not use cash in the journal entry. Thus option (C) is also incorrect.

So answer will be option (B).

Let’s see journal entries for this question;

For Sale;

Accounts Receivable

$2100

     Sales Revenue

$2100

For Cost of goods sold;

Cost of Goods Sold

$1050

     Merchandise Inventory

$1050

Accounts Receivable

$2100

     Sales Revenue

$2100

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