In a Perpetual Inventory System, Two Entries Usually Are Made

question 67

Multiple Choice

In a perpetual inventory system, two entries usually are made to record each sales transaction. The purposes of these entries are best described as follows:

• A) One entry recognizes the sales revenue, and the other recognizes the cost of goods sold.
• B) One entry records the purchase of the goods, and the other records the sale.
• C) One entry records the cost of goods sold, and the other reduces the balance in the Inventory account.
• D) One entry updates the general ledger, and the other updates the subsidiary ledgers.

---

Definitions:

After-Tax Discount Rate

The discount rate used in investment appraisal and financial analysis that takes into account the effect of taxes on the rate of return.

Income Tax Rate

The percentage at which income is taxed by the government, varying across income levels and jurisdictions.

Straight-Line Depreciation

A technique for distributing the expense of an asset uniformly over its lifetime.

Renovation Cost

The financial outlay involved in restoring, updating, or modifying an asset, often a building, to either improve its value or extend its life.