A Company That Uses the Perpetual Inventory System Purchased 500 $$\begin{array} { | c | r | r | } \hline \text { Accounts Receivable } & 14,000 & \\\hline \text { Sales Revenue } & & 14,000 \\\hline\end{array}$$

question 105

Multiple Choice

A company that uses the perpetual inventory system purchased 500 pallets of industrial soap for $7,000 and paid $800 for the freight-in.The company sold the whole lot to a supermarket chain for $14,000 on account.Which of the following entries correctly records the sale?

• A) \[\begin{array} { | c | r | r | }
• \hline \text { Accounts Receivable } & 14,000 & \\
• \hline \text { Sales Revenue } & & 14,000 \\
• \hline
• \end{array}\]
• \[\begin{array} { | c | r | r | }
• \hline \text { Cost of Goods Sold } & 7,800 & \\
• \hline \text { Merchandise Inventory } & & 7,800 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | r | r | }
• \hline \text { Merchandise Inventory } & 14,000 & \\
• \hline \text { Cost of Goods Sold } & & 14,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | r | r | }
• \hline \text { Cost of Goods Sold } & 14,000 & \\
• \hline \text { Sales Revenue } & & 14,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | c | r | r | }
• \hline \text { Accounts Receivable } & 14,000 & \\
• \hline \text { Sales Revenue } & & 14,000 \\
• \hline
• \end{array}\]
• \[\begin{array} { | c | r | r | }
• \hline \text { Cost of Goods Sold } & 7,000 & \\
• \hline \text { Merchandise Inventory } & & 7,000 \\
• \hline
• \end{array}\]

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Definitions:

Discounted

The method of calculating the current value of a future sum of money or series of cash flows using a particular return rate.

Interest Expense

The financial charges a company bears for loaned money across a time frame.

Note Payable-National Bank

A written promise to pay a specific sum of money, borrowed from a national bank, at a future date.

Carrying Value

Also known as the book value, it is the value of an asset on a company's balance sheet after accounting for depreciation, amortization, or impairment costs.