Question

Lori's Lemons and Limes Limited is a Florida fruit company that has elected to record inventory using the perpetual system. Assume that Lori sold merchandise that cost $41,000 for $78,000. What would Lori's journal entry be?

Answer 1

Under perpetual inventory system, inventory is recorded real time based on the transactions of stock purchased or stock sold.

As soon as an inventory transaction of stock purchased or sold takes place, it is entered into the system and inventory balances and costs are updated automatically.

The inventory balance is updated with the cost of the goods purchased or sold.

	Account	Debit	Credit
1	Accounts Receivable	$78,000
	Revenue		$78,000
2	Cost of goods	$41,000
	Inventory		$41,000