12,0n May 1, Donna Corporation sold items totaling $7,150 to Russo, with credit

Question

12,0n May 1, Donna Corporation sold items totaling $7,150 to Russo, with credit terms of 3710, n/30. The cost of the items sold is $4,150. Donna uses the gross method of recording s Shilling will make onMaylis:- ales and a perpetual inventory system, The journal entry or entries that A. Accounts Receivable 7,150 Sales .150 B. Accounts Receivable 7,150 Sales 7,150 Cost of goods sold 4,150 4,150 C. Sales 7.150 Accounts Receivable 7,150 Sales 7,150 Accounts Receivable 7,150 Cost of goods sold 4,150 Merchandise inventory Accounts 4,150 receivable Sales 4.150

Explanation / Answer

Correct answer is B.

A/R is an asset account so it will be debited by 7150, and corresponding accounting sales account will be credited, by same amount.

Since company is following perpetual inventory sys, inventory will be reduced by 4150, so inventory account will be credited by 4150, and corresponding account COGS will be debited with same amount.

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