Addison, Inc -When Using a Perpetual Inventory System, the Journal Entry to Information

question 104

Multiple Choice

Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for the month of September:
$\begin{array} { r l l } \text { Sept. } 1 & \text { Inventory } & 20 \text { units at } \$ 20 \\ 4 & \text { Sale } & 10 \text { units } \\ 10 & \text { Purchase } & 30 \text { units at } \$ 25 \\ 17 & \text { Sale } & 20 \text { units } \\ 30 & \text { Purchase } & 10 \text { units at } \$ 30 \end{array}$
-When using a perpetual inventory system, the journal entry to record the cost of merchandise sold is

• A) debit Cost of Merchandise Sold; credit Sales
• B) debit Cost of Merchandise Sold; credit Merchandise Inventory
• C) debit Merchandise Inventory; credit Cost of Merchandise Sold
• D) No journal entry is made to record the cost of merchandise sold.

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Definitions:

Manufacturing Overhead

All indirect costs associated with the production process, such as utilities, rent, and salaries for support staff.

Departmental Predetermined Overhead Rates

Rates calculated to allocate overhead costs to products or services, based on department-specific activities and cost drivers.

Machine-Hours

An accounting term that indicates the total number of hours a machine is used during a specific period for manufacturing purposes.

Manufacturing Overhead

All indirect costs associated with the production of goods, including utilities, rent for production facilities, and maintenance expenses.