When Merchandise Is Sold and the Perpetual System of Inventory

question 80

Multiple Choice

When merchandise is sold and the perpetual system of inventory is used, the journal entry to record a sale of merchandise on account would include:

• A)debiting Accounts Receivable and crediting Sales.
• B)debiting Accounts Receivable and crediting Inventory.
• C)debiting Accounts Receivable and crediting Cost of Goods Sold.
• D)debiting Cost of Goods Sold and crediting Accounts Receivable.

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Definitions:

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, leading to a decrease in the cost per unit as output increases.

Outputs

The goods or services produced by a business or an economy.

Long-run Average Cost

The per unit cost of production when all inputs, including those typically fixed, can be adjusted.

Short-run Marginal Cost

The cost incurred by producing one additional unit of a product or service in the short term, where some factors of production are fixed.