Question

Sunrise Flowers sells flowers to a customer on credit for $130 on October 18, with a cost of sale to Sunrise of $50. What entry to recognize this sale is required if Sunrise Flowers uses a; perpetual; inventory system?

a) Accounts Receivable $130, Sales $130, Cost of Goods Sold $50, Inventory $50
b) Accounts Receivable $130, Sales $130
c) Accounts Receivable $130, Cost of Goods Sold $50
d) Sales $130, Cost of Goods Sold $50

Answer 1

The correct entry in a perpetual inventory system for a credit sale of $130 with a cost of sale of $50 includes recording both the receivable and sale, and also recognizing the cost by decreasing inventory and increasing COGS. Thus, the entry involves debiting Accounts Receivable and crediting Sales for $130, and debiting COGS and crediting Inventory for $50.

Step-by-step explanation:

The correct entry to recognize the sale of flowers on credit for $130 with a cost of sale of $50 in a perpetual inventory system for Sunrise Flowers would involve two main components. First, the sale needs to be recorded showing that the customer now owes Sunrise Flowers money. This is done through an increase in Accounts Receivable and an increase in Sales revenue. Secondly, the cost associated with the sale has to be recognized, which means decreasing Inventory by the cost of the sold flowers and recording that cost into Cost of Goods Sold (COGS). Therefore, the correct journal entry would be:

• Accounts Receivable $130
• Sales $130
• Cost of Goods Sold $50
• Inventory $50

This entry properly reflects the increase in receivables and sales while also showing the cost flow from inventory to the cost of sales. Hence, the correct option is: a) Accounts Receivable $130, Sales $130, Cost of Goods Sold $50, Inventory $50.