Question

The Corbit Corp. sold merchandise on account for, $7,200. Corbit Corp. utilizes the periodic inventory system. The cost of the merchandise sold was $3,950. The journal entry(s) to record this transaction would be:

Answer 1

Answer:

Debit Accounts receivable 7,200

Credit Sales 7,200

Debit Cost of Merchandise Sold 3,950

Credit Merchandise Inventory 3,950

Explanation:

When Corbit corps sells merchandise on account it means that cash was not received for the transaction. So we debit accounts receivable (an asset account to indicate increase in amount receivable by us). A credit is now passed to sales to show increased sales.

On merchandise we debit cost of merchandise sold and credit Merchandise inventory (an asset account is credited to indicate reduction) to indicate merchandise has reduced.