Azure Company Uses the Perpetual Inventory System

Multiple Choice

Azure Company uses the perpetual inventory system. On May 3, it sold merchandise on account to Sigma Enterprises, invoice no. 672, $4,500. Cost of inventory sold is $3,850. Which of the following journal entries records the effect on merchandise inventory?

A) A debit to Accounts Receivable of $4,500, a credit to Merchandise Inventory of $4,500
B) A debit to Cost of Goods Sold of $4,500, a credit to Merchandise Inventory of $4,500
C) A debit to Cost of Goods Sold of $3,850, a credit to Merchandise Inventory of $3,850
D) A debit to Accounts Receivable of $3,850, a credit to Merchandise Inventory of $3,850