Question

A company sells goods at a selling price of $20,000. The cost of the goods is $15,000 Under a perpetual inventory system the journal entries to record the sale will include:

A.$15,000 will be debited to Cost of goods sold and $15,000 will be credited to Sales.
B.$15,000 will be debited to Inventory and $15,000 will be credited to Accounts Payable.
C.$15,000 will be credited to Inventory and $15,000 will be credited to Sales.
D.$15,000 will be debited to Cost of goods sold and $15,000 will be credited to Inventory.

Answer 1

The correct journal entry for the sale of goods in a perpetual inventory system is a debit to Cost of Goods Sold and a credit to Inventory, each for $15,000. The accounting profit of the given firm is calculated to be $50,000 by subtracting the explicit costs from total revenues.

Step-by-step explanation:

The correct journal entry under a perpetual inventory system for a company that sells goods at a selling price of $20,000, where the cost of the goods is $15,000, would be Option D: $15,000 will be debited to Cost of Goods Sold and $15,000 will be credited to Inventory. This reflects the decrease in inventory due to the sale and the cost associated with the goods sold.

Considering the self-check question provided, a firm's accounting profit is calculated by subtracting explicit costs from total revenues. The firm had sales revenue of $1 million last year and spent $600,000 on labor, $150,000 on capital, and $200,000 on materials. Therefore, the accounting profit would be:

Accounting profit = Total revenues - Explicit costs = $1,000,000 - ($600,000 + $150,000 + $200,000) = $50,000.