Question

Our company sold merchandise on account with a cost of $700 for $1,000. Our company uses a perpetual inventory system. What account and amount would we credit to record the cost of the merchandise sold? Group of answer choices

-accounts receivable, $1,000
-sales, $1,000
-merchandise inventory, $700
-cost of goods sold, $700

Answer 1

The account credited for the cost of the merchandise sold under a perpetual inventory system when merchandise costing $700 is sold for $1,000 is 'merchandise inventory' for $700.

Step-by-step explanation:

The correct account and amount that would be credited to record the cost of the merchandise sold, when a company using a perpetual inventory system sells merchandise on account with a cost of $700 for $1,000, is merchandise inventory, $700. In a perpetual inventory system, the cost of goods sold (COGS) is updated continuously as sales occur.

When a sale is made, two entries are typically recorded: one to reflect the revenue from the sale (accounts receivable or cash, $1,000) and one to reflect the COGS (debit cost of goods sold, $700, and credit merchandise inventory, $700). The $1,000 revenue from the sale is not involved in recording the cost of merchandise sold; it is recorded separately as a debit to accounts receivable (assuming the merchandise was sold on account) and a credit to sales.