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Under the perpetual system a merchandiser sells 50 items on account for $15 each that had cost $10 each. Which TWO entries record this single sale?
ADebit Accounts Receivable $750 / credit Sales $750 only, with no inventory entry
BDebit Accounts Receivable $750 / credit Sales $750; debit Cost of Sales $500 / credit Merchandise Inventory $500
CDebit Sales $750 / credit Accounts Receivable $750; debit Merchandise Inventory $500 / credit Cost of Sales $500
DDebit Accounts Receivable $500 / credit Sales $500; debit Cost of Sales $750 / credit Merchandise Inventory $750
Answer & Solution
Correct answer: B. Debit Accounts Receivable $750 / credit Sales $750; debit Cost of Sales $500 / credit Merchandise Inventory $500
1. Revenue entry uses the selling price: 50 x $15 = $750, debit Accounts Receivable, credit Sales.
2. Under perpetual, a second entry removes the cost: 50 x $10 = $500, debit Cost of Sales, credit Merchandise Inventory.
3. Option B omits the required cost-of-sales entry; option C reverses both directions.
4. Option D swaps the $750 selling price and $500 cost between the two entries.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §3.3 "Basic Merchandising Transactions (Perpetual Inventory System)", p.96_
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