Cost of goods sold



Q12. Cost of goods sold
Entity A sold 100 units of merchandise in cash at a selling price of $17 per unit.
The purchase cost of merchandise sold is $14 per unit.
Prepare journal entries to record sales revenue and the cost of goods sold.

A12. The cost of merchandise sold is recorded on the debit side of the cost of goods sold account.

(1) To record sales revenue

  Debit Credit
Cash 1,700  
     Sales revenue   1,700

[Note]
Sales revenue = 100 units x $17 = $1,700

(2) To record the cost of goods sold

  Debit Credit
Cost of goods sold 1,400  
     Merchandise   1,400

[Note]
1. Increase in cost of goods sold (expense): debit
2. Decrease in merchandise (asset): credit
3. Cost of goods sold = 100 units x $14 = $1,400

[Exercise]
Entity B sold 300 units of merchandise on account at a selling price of $25 per unit. Entity B purchased merchandise at $21 per unit previously.

(1) To record sales revenue

  Debit Credit
Accounts receivable 7,500  
     Sales revenue   7,500

[Note]
Sales revenue = 300 units x $25 = $7,500

(2) To record the cost of goods sold

  Debit Credit
Cost of goods sold 6,300  
     Merchandise   6,300

[Note]
1. Increase in cost of goods sold (expense): debit
2. Decrease in merchandise (asset): credit
3. Cost of goods sold = 300 units x $21 = $6,300

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