MANAGEMENT

Detailed explanation-1: -Using a perpetual inventory system, the buyer’s journal entry to record the return of merchandise purchased on account includes a d) credit to inventory. The purchase of the inventory under the perpetual inventory system means that inventory was debited and accounts payable was credited.

Detailed explanation-2: -(Assume the seller uses perpetual inventory system.) Under the perpetual inventory system, two journal entries are used to record the sales of merchandise. One entry records the Sales Revenue and another entry records the Cost of Goods Sold.

Detailed explanation-3: -Goods available for sale can be sold and then become cost of goods sold on the income statement. The journal entry for this transaction using a perpetual inventory system includes a debit to Cash of $1, 000 and a credit to Sales revenue of $1, 000; a debit to Cost of goods sold of $600 and a credit to Inventory of $600.

Detailed explanation-4: -Under the perpetual system, purchases, purchase returns and allowances, purchase discounts, sales, and sales returns are immediately recognized in the inventory account, so the inventory account balance should always remain accurate, assuming there is no theft, spoilage, or other losses.