How Should Davis Hardware Company Record the Sale of Merchandise?
Explanation:
In a perpetual inventory system, Davis Hardware Company should record the sale of merchandise by debiting Accounts Receivable for $1,040 and crediting Sales Revenue for $1,040. Additionally, Inventory should be debited for the cost of the merchandise, which is $660, and Cost of Goods Sold should be credited for the same amount. The entry would be:
Accounts Receivable - $1,040
Sales Revenue - $1,040
Inventory - $660
Cost of Goods Sold - $660