Question

Davis hardware company uses a perpetual inventory system. how should davis record the sale of merchandise, costing $770, and sold on account for $1,260?

Answer 1

The required entries are as follows:

Dr. Cost of goods sold  $770

Cr. Inventory                            $770

Dr. Accounts receivable    $1,260

Cr. Sales revenue                            $1,260

What entries are required for sale of merchandise?

When merchandise is sold, the company's inventory reduces and cost of goods sold increases ,hence, the appropriate entries are to debit cost of goods sold in the income statement and credit the inventory account in the balance sheet.

Also, to account for sale on account, which means credit sales, the revenue account is credited with the sales value whereas the account receivables which represents claim from the customer is debited, this would happen for every transaction because the inventory system is perpetual.

Find out more about merchandise on:brainly.com/question/13720527

#SPJ1