When a Company That Uses the Perpetual Inventory System Sells $\begin{array}{|l|c|c|} \hline \text { Cost of Goods Sold } & \text { XX} &\\\hline \text { Sales } & & \text { XX }\\\hline\end{array}$

question 212

Multiple Choice

When a company that uses the perpetual inventory system sells goods for cash,the journal entry to record cost of goods sold is:

• A) \(\begin{array}{|l|c|c|}
• \hline \text { Cost of Goods Sold } & \text { XX} &\\
• \hline \text { Sales } & & \text { XX }\\
• \hline
• \end{array}\)
• B) No journal entry is required.
• C) \(\begin{array}{|l|c|c|}
• \hline \text { Cost of Goods Sold } & \text { XX } \\
• \hline \text { Merchandise Inventory } && \text { XX }\\
• \hline
• \end{array}\)
• D) \(\begin{array}{|l|l|l|}
• \hline\text { Sales } & \mathrm{XX} & \\
• \hline \text { Merchandise Inventory } & & \mathrm{XX} \\
• \hline
• \end{array}\)

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Definitions:

Extent of Influence

Refers to the degree to which an investor can sway management decisions and operational policies of an investee due to ownership level or other factors.

Common Stock

A type of securities that represents ownership in a corporation, granting holders voting rights and a share in the company’s profits via dividends.

Equity Method

An accounting technique used by firms to assess the profits earned by their investments in other companies and to reflect this in the profit and loss statement proportionally to their ownership level.