Question

On May 1, Shilling Company sold merchandise in the amount of $5,800 to Anders, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Shilling uses the perpetual inventory system. The journal entry or entries that Shilling will make on May 1 is:

A) Sales Accounts receivable 5,800 5,800

B) Sales Accounts receivable Cost of goods sold Merchandise Inventory 5,800 5,800 4,000 4,000

C) 5,800 Accounts receivable 5,800 Sales

D) 5,800 Accounts receivable 5,800 Sales Cost of goods sold, Merchandise Inventory are 4,000, 4,000

E) 4,000 Accounts receivable 4,000 Sales

Answer 1

Answer:

D) 5,800 Accounts receivable 5,800 Sales Cost of goods sold, Merchandise Inventory are 4,000, 4,000

Explanation:

The entry for the credit sale is:

Debit Accounts receivable $5800

Credit sales $5800

As perpetual inventory method is followed, the cost of goods sold has to be accounted along with the entry for the credit sale. The entry for recording the cost of goods sold is:

Debit Cost of goods sold $4000

Credit Merchandise inventory $4000