Answer:
Credit Inventory and debit cost of sales with cost of inventory $620 and
Credit Sales and Debit Account receivable or Cash for Sale value of $960
Explanation:
Under the Perpetual inventory system, no purchases account are maintained rather an on-going balance for two accounts are maintained, namely: 'cost of goods available for sale' and 'cost of goods sold'.
Since no purchases account is maintained under this method, the inventory account is updated with every purchase of inventory, and all expenses relating to inventory directory.
So if Davis makes a sale of inventory costing $620 for $960 on account, the following entries will be effected.
Dr Cost of Sales............................620
Cr. Inventory...............................................620
Dr. Accounts Receivable............960
Cr. Sales....................................................960
Being sale of goods worth $620 at $960
