A company that uses perpetual inventory system made the following cash purchases and sales:...

Question:

A company that uses perpetual inventory system made the following cash purchases and sales:

January 1 Purchased 100 units at $10 per unit.
February 5: Purchased 60 units at $12 per unit.
March 16: Sold 40 units for $16 per unit.

Prepare general journal entries to record the March 16 sales assuming a FIFO method is used.

Sales under the perpetual inventory system:

Under perpetual inventory system, when sales are made, the cost of goods sold account is debited and the inventory account is credited for the goods sold. Depending on the inventory valuation methods, the costs charged to the sales differ. For eg. under FIFO, the earliest costs are charged to the cost of goods sold, whereas under LIFO latest costs are charged to the cost of goods sold.

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Journal entries to record cash sales, under perpetual inventory system using FIFO:

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Recording Sales Using the Perpetual System

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Chapter 6 / Lesson 8
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Sales can be recorded in two inventory systems: periodic, where inventory is updated in chronological increments, or perpetual, where inventory is updated for each individual sale. Identify the benefits to using these systems and review examples of how each records a business's sales.


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