Question

Inventory that cost $500 is sold for $700, with terms of 2/30,n/60. Give the journal entries to record

(a) the sale of merchandise and
(b) collection of the accounts receivable. Assume the sales discount is taken and accounted for using the gross method, and a perpetual inventory system is used.

Answer 1

The journal entry to record the sale of merchandise is a debit to Accounts Receivable and a credit to Sales Revenue, as well as a credit to Inventory and a debit to Cost of Goods Sold. The journal entry to record the collection of the accounts receivable is a debit to Cash and a credit to Accounts Receivable.

Step-by-step explanation:

The journal entry to record the sale of merchandise would be:

1. Debit Accounts Receivable: $700
2. Credit Sales Revenue: $700
3. Credit Inventory: $500
4. Debit Cost of Goods Sold: $500

The journal entry to record the collection of the accounts receivable would be:

1. Debit Cash: $700
2. Credit Accounts Receivable: $700