# 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