Question

Clark uses the perpetual inventory system. Clark sells goods to a customer on account for $1,000. The cost of the goods sold was $700. Which of the following entries are required?

Answer 1

Clark must make two journal entries under the perpetual inventory system upon selling goods on account: one to record the revenue from the sale for $1,000 and another to record the cost of goods sold for $700.

Step-by-step explanation:

When Clark sells goods on account using the perpetual inventory system, two journal entries are required. The first entry would record the sale on account, debiting Accounts Receivable and crediting Sales Revenue for the sales amount of $1,000. The second entry is to record the cost of goods sold (COGS), which involves debiting Cost of Goods Sold and crediting Inventory for the cost amount of $700. The purpose of these entries is to reflect the decrease in inventory and to acknowledge the expense related to the goods sold. Below are the corresponding entries:

• Debit Accounts Receivable $1,000
• Credit Sales Revenue $1,000
• Debit Cost of Goods Sold $700
• Credit Inventory $700