Question

All purchase/sale transactions are made on credit. The company uses the FIFO method and perpetual inventory system to record transactions. The entry to record the transaction on December 10 will involve a debit to Cost of Goods Sold for _____.

Answer 1

The entry to record the transaction on December 10 will involve a debit to Cost of Goods Sold for the cost of the oldest inventory on hand.

Step-by-step explanation:

When using the FIFO method and perpetual inventory system to record transactions, the entry to record a purchase/sale transaction on December 10 involves a debit to Cost of Goods Sold for the cost of the oldest inventory on hand.

This means that the cost of the first inventory items purchased will be transferred to the Cost of Goods Sold account. The specific dollar amount will depend on the cost of those items.

For example, if the cost of the oldest inventory on hand is $100, the entry to record the transaction would be a debit to Cost of Goods Sold for $100.