Mitchell Uses a Perpetual Inventory System

question 73

Multiple Choice

Mitchell uses a perpetual inventory system.Mitchell sells a computer from inventory for $1,198 on credit.Mitchell originally bought the computer from IBM for $790.What journal entry (entries) will Mitchell prepare to record the sale?

• A)Debit Cash and credit Sales Revenue for $1,198;debit Cost of Goods Sold and credit Inventory for $790.
• B)Debit Accounts Receivable for $1,198,credit Inventory for $790,and credit Gross Profit for $408.
• C)Debit Accounts Receivable and credit Sales Revenue for $1,198;debit Cost of Goods Sold and credit Inventory for $790.
• D)Debit Inventory for $790,debit Cost of Goods Sold for $408,and credit Accounts Receivable for $1,198.

---

Definitions:

Revenue Recognition

The accounting rule that specifies the particular scenarios in which revenue is acknowledged or recorded.

Software Delivery

The process through which software is made available to and installed on the end user's computer or device.

Unearned Franchise Fees

Income received by a franchisor for which the services have not yet been provided or realized.

Notes Receivable

Represents claims for which formal written promises of payment have been received by the business.