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