Question

A firm just made a $1,000,000.00 sale to a retail chain. The firm will be 50.00% in cash today, and then pay the remainder in 30 days (a receivable for the firm). The firm fills the sale with $400,000.00 in inventory. Consider how an accountant will handle this transaction.

Answer 1

An accountant would record the sale as revenue and the cash received, and the remaining amount to be paid in 30 days as a receivable. Inventory would be reduced by the cost of the items sold.

Step-by-step explanation:

An accountant would handle this transaction by recording the sale as revenue and the cash received as an asset. The remaining amount to be paid in 30 days would be recorded as a receivable on the firm's balance sheet. Inventory would be reduced by the cost of the items sold, which in this case is $400,000.

Therefore, the journal entry for the sale would be:

1. Debit: Accounts Receivable $500,000
2. Credit: Sales Revenue $1,000,000
3. Debit: Cost of Goods Sold $400,000
4. Credit: Inventory $400,000
5. Debit: Cash $500,000

Answer 2

Record #1

Cash $500,000.00

Accounts Receivables $500,000.00

Sale $1,000,000.00

Record #2

Cost of Goods $1,000,000.00

Inventory $400,000.00

Gain on sales $600,000.00

Step-by-step explanation:

The firm has a Gain on sales for $600,000.00 because of their inventory cost $400,000.00 but they sold it by $1,000,000.00