Question

Middleton Company uses the perpetual inventory method. The company purchased an item of inventory for $130 and sold the item to a customer for $200.
What effect will the sale have on the company's Cost of Goods Sold account?

A. The account will increase by $200
B. The account will increase by $130
C. The account will increase by $70
D. No effect

Answer 1

The account will decrease by $130

Explanation:

Using the computerized point-of-sale systems and enterprise asset management software the inventories that are sold or purchased are recorded under the Perpetual inventory method. This method will provide the details about the running balance related to the cost of the available goods and services and also the cost of the good and services that are sold.

The expenses will be debited to inventory account. In the example given Middleton  company purchased an item of inventory for $130 and sold the item to a customer for $200. Using the  perpetual inventory method the effect of sale on account of the company;s goods sold will be that The account will decrease by $130.

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