A Company That Uses the Perpetual Inventory System Purchased 500

question 118

Multiple Choice

A company that uses the perpetual inventory system purchased 500 pallets of industrial soap for $12,000 and paid $770 for the freight-in.The company sold the whole lot to a supermarket chain for $13,000 on account.The company uses the specific-identification method of inventory costing.Which of the following entries correctly records the cost of goods sold?

• A) \[\begin{array} { | l | r | r | }
• \hline \text { Cost of Goods Sold } & 12,770 & \\
• \hline \text { Merchandise Inventory } & & 12,770 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l| r | r | }
• \hline \text { Merchandise Inventory } & 12,770 & \\
• \hline \text { Cost of Goods Sold } & & 12,770 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | r | r | }
• \hline \text { Cost of Goods Sold } & 12,000 & \\
• \hline \text { Sales Revenue } & & 12,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Cost of Goods Sold } & 12,000 & \\
• \hline \text { Merchandise Inventory } & & 12,000 \\
• \hline
• \end{array}\]

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Definitions:

Net Profit

The financial gain after all expenses, taxes, and costs have been subtracted from total revenue.

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The total number of hours worked by employees within a specific time period, often used to measure productivity or to calculate labor costs.

Production Department

A division within a company responsible for the actual manufacturing or creation of goods and services.