A Company That Uses the Perpetual Inventory System Purchased an Order

question 35

Multiple Choice

A company that uses the perpetual inventory system purchased an order of 500 pallets of industrial soap for $8,000 and paid $750 for the freight-in. The company sold the whole lot to a supermarket chain for $10,000 on account. The company uses the specific-identification method of inventory costing. Which of the following entries correctly records the Cost of goods sold?

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Definitions:

Substitution Effect

The change in consumption patterns due to a shift in the relative prices of goods, leading consumers to substitute one good for another.

Input Price

The cost of resources (labor, materials, etc.) used in the production of goods or services.

Complementary

Goods or services that are often used together, such that the increase in consumption of one leads to an increase in the consumption of the other.

Demand for Labor

The total amount of workers that employers are willing and able to hire at a given wage rate within a certain period.