Question

A company that uses the perpetual inventory system sold goods to a customer for cash for $3,000. The cost of the goods sold was $1,000. Which of the following journal entries correctly records this transaction?

A. Cost of Goods Sold $3,000
Sales Revenue $3,000
B. Merchandise Inventory $3,000
Sales Revenue $3,000
C. Accounts Receivable $3,000
Cash $3,000
D. Cash $3,000
Sales Revenue $3,000
Cost of Goods Sold $1,000
Merchandise Inventory $1,000

Answer 1

D.

Cash $3,000

Sales Revenue $3,000

Cost of Goods Sold $1,000

Merchandise Inventory $1,000

Step-by-step explanation:

Perpetual Inventory system calculates the cost of inventory after every sale. Thus on the date of sale we must always recognize two things : 1. The Revenue incurred and 2. The cost of goods sold.

The Journal Entries for the question you have provided will be :

Cash $3,000 (debit)

Cost of Goods Sold $1,000 (debit)

Sales Revenue $3,000 (credit)

Merchandise Inventory $1,000 (credit)