What Event and Inventory Method May Have Produced the Following

question 149

Multiple Choice

What event and inventory method may have produced the following journal entry?

• A)A return of goods by a customer under the periodic inventory method.
• B)A sale of goods under the periodic inventory method.
• C)A return of goods by a customer under the perpetual inventory method.
• D)A sale of goods under the perpetual inventory methoD.The return of goods by a customer under the perpetual inventory method would produce this entry debiting (increasing) merchandise inventory and crediting (decreasing) cost of goods sold. In a periodic system, sales returns are not recorded in the merchandise inventory account, but in the sales returns account.

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Definitions:

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choice.

Monetary Payments

Transactions involving the transfer of money in exchange for goods or services.

Price-Taker Market

A competitive market situation where individual sellers or buyers have no influence over the market price of a product.

Market Price

The current price at which an asset or service can be bought or sold in a given market.