Final answer:
The accounting entries for Borst Company's credit sale to McLeena Company involve recording the receivable and revenue from the sale, and the cost of goods sold against inventory.
Step-by-step explanation:
When Borst Company sells merchandise on account to McLeena Company, two primary transactions need to be recorded: the sales transaction and the cost of goods sold (COGS). The sales transaction is a credit sale, which means that Borst Company would make the following entry in their accounting records:
- Accounts Receivable - $800,000
- Sales Revenue - $800,000
(To record credit sale of merchandise)
As for the cost of the merchandise sold, the entry would look like this:
- Cost of Goods Sold - $540,000
- Inventory - $540,000
(To record the cost of merchandise sold)
This records both the revenue received from the sale and the cost associated with the sale, directly affecting the company's gross profit.