Question

Davis Hardware uses a perpetual inventory system. How should Davis record the sale of merchandise, costing $620 and sold for $950 on account?

A) Debit Cash, Credit Sales Revenue
B) Debit Accounts Receivable, Credit Sales Revenue
C) Debit Cost of Goods Sold, Credit Inventory
D) Debit Sales Revenue, Credit Accounts Payable

Answer 1

Davis Hardware should record the sale of merchandise, costing $620 and sold for $950 on account, by debiting Accounts Receivable and crediting Sales Revenue.

Step-by-step explanation:

Davis Hardware, using a perpetual inventory system, should record the sale of merchandise, costing $620 and sold for $950 on account, by debiting Accounts Receivable and crediting Sales Revenue. This is because the sale is made on account, meaning the customer will pay at a later date, so the amount owed is recorded as an account receivable. The revenue from the sale is credited to Sales Revenue.