Under a Perpetual Inventory System, the Entry to Record the Return

question 4

Multiple Choice

Under a perpetual inventory system, the entry to record the return of inventory sold on account for $360 with a cost of $210 would be recorded by the seller as a:

• A)credit to Accounts Receivable for $210.
• B)credit to Sales Returns and Allowances for $210.
• C)debit to Sales Revenue for $360.
• D)debit to Inventory for $210.

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Definitions:

Standard Cost System

An accounting method that uses standard costs for direct materials, labor, and overhead to assess performance and control costs.

Price Variance

The difference between the actual price paid for a good or service and its expected price, often analyzed in budgeting and cost management.

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours expected for the actual production level, multiplied by the standard labor rate.

Direct Materials

The raw materials that are directly traceable to a finished product and are an integral part of the finished product.