Question

Crane Hardware Store completed the following merchandising transactions in the month of May. Which of the following options correctly represents these transactions?

A) Purchased inventory on account, $5,000. Sold merchandise on account, $8,000.
B) Sold merchandise for cash, $10,000. Paid suppliers for inventory purchased on account, $6,000.
C) Collected accounts receivable, $3,500. Paid rent expense in cash, $1,200.
D) Issued common stock for cash, $7,000. Purchased equipment on account, $4,500.

Answer 1

The correct option that represents the merchandising transactions of Crane Hardware Store in the month of May is option A. Purchased inventory on account, $5,000. Sold merchandise on account, $8,000.

Step-by-step explanation:

In May, Crane Hardware Store engaged in merchandising transactions by purchasing inventory on account, totaling $5,000, and subsequently selling merchandise on account for $8,000. These transactions reflect the acquisition of inventory on credit, resulting in an accounts payable of $5,000, and the sale of merchandise on credit, generating accounts receivable of $8,000. Such dealings are fundamental in the realm of merchandising, illustrating the interconnected financial activities inherent to this business model.

The store's financial records would capture these transactions, reflecting both the liability incurred through the purchase and the anticipated revenue from the sales, providing a snapshot of the store's financial position during the month of May.