Question 1 Brendan Company sold merchandise worth $1,600 on credit, terms n/15.

Question

Question 1 Brendan Company sold merchandise worth $1,600 on credit, terms n/15. The merchandise sold had cost $1,100. What is the required journal entry to record the transaction under the perpetual inventory system? A. Accounts Receivables 1,600 Sales 1,600 Cost of Goods Sold 1,100 Merchandise Inventory 1,100 B. Sales 1,600 Accounts Receivables 1,600 Merchandise Inventory 1,100 Cost of Goods Sold 1,100 C. Accounts Receivables 1,600 Merchandise Inventory 1,600 Cost of Goods Sold 1,100 Merchandise Inventory 1,100 D. Merchandise Inventory 1,600 Sales 1,600 Cost of Goods Sold 1,100 Merchandise Inventory 1,100

Explanation / Answer

The entries to be passed would be:

1. Accounts Receivables Dr. $1,600

Sales $1,600

(Being goods sold on credit)

2. Cost of Goods Sold Dr. $1,100

Merchandise Inventory $1,100

(Being cost of goods sold recorded and inventory balance reduced)

In perpetual system, the inventory addition and deletion is to be done at the time of sale/purchase. Hence entry for inventory is to be recorded for each transaction giving effect to cost of goods sold.

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