Under the Perpetual Inventory System, in Addition to Making the Entry

question 3

Multiple Choice

Under the perpetual inventory system, in addition to making the entry to record a return of goods from a customer, a company would:

• A) debit Merchandise Inventory and credit Cost of Goods Sold.
• B) debit Cost of Goods Sold and credit Merchandise Inventory.
• C) debit Sales and credit Cost of Goods Sold.
• D) debit Purchases and credit Cost of Goods Sold.

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Definitions:

Unamortized Premium

The portion of the bond premium that has not yet been amortized or gradually written off against earnings over the bond's life.

Par-Value Approach

An accounting method that assigns a nominal value to the shares of a corporation, which may bear no correlation to the market value of those shares.

Common Shares

Equity securities representing ownership in a corporation, providing voting rights, and entitling holders to a share of the company’s success through dividends and/or capital appreciation.

Agency Approach

A mechanism used in financial management where one party (the agent) is allowed to act on behalf of another (the principal) in financial transactions or decisions.