Davis Hardware Company Uses a Periodic Inventory System B) Accounts Receivable

question 95

Multiple Choice

Davis Hardware Company uses a periodic inventory system. How should Davis record the sale of inventory costing $620 for $960 on account?

• A) \[\begin{array} { c c c } \text { Cost of Goods Sold } & 620 & \\ \text { Purchases } & & 620 \\ \text { Accounts Receivable } & 960 & \\ \text { Sales Revenue } & & 960 \end{array}\]
• B) Accounts Receivable \(\quad 960\) Sales Revenue\(\quad 960\)
• D) \[\begin{array} { c c r } \text { Accounts Receivable } & 960 & \\ \text { Sales Revenues } & 620 \\ \text { Gain } & 340 \end{array}\]

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Definitions:

Account Title

The name given to an account in the general ledger that reflects the type of asset, liability, equity, revenue, or expense it represents.

Credit Side

The right side of an account record in double-entry bookkeeping, used to record increases in liability, equity, and revenue accounts, and decreases in asset and expense accounts.

Prepaid Expenses

Payments made in advance for goods or services to be received in the future, considered as a current asset on the balance sheet.

Expense

Money spent or cost incurred in an entity’s efforts to generate revenue, representing the cost of doing business.