Multiple Choice
In the context of journal entries, which of the following best explains why a parse error might occur when multiplying price by quantity in an accounting software?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
Salmone Company reported the following transactions during the year:- Purchased inventory for \$5,000 on account- Sold inventory costing \$3,000 for \$6,000 cashWhich of the following is the correct journal entry to record the sale of inventory?
A
Debit Cash \$6,000; Credit Sales Revenue \$6,000; Debit Cost of Goods Sold \$3,000; Credit Inventory \$3,000
B
Debit Cash \$3,000; Credit Sales Revenue \$3,000; Debit Cost of Goods Sold \$6,000; Credit Inventory \$6,000
C
Debit Inventory \$3,000; Credit Sales Revenue \$3,000; Debit Cash \$6,000; Credit Cost of Goods Sold \$6,000
D
Debit Sales Revenue \$6,000; Credit Cash \$6,000; Debit Inventory \$3,000; Credit Cost of Goods Sold \$3,000
Verified step by step guidance1
Understand the nature of the transaction: The company sold inventory costing \$3,000 for \$6,000 cash. This transaction involves two key components: (1) recording the revenue from the sale and (2) recording the cost of goods sold (COGS) and reducing inventory.
Step 1: Record the revenue from the sale. Since the company received \$6,000 in cash, you need to debit the Cash account for \$6,000. To recognize the revenue, you credit the Sales Revenue account for \$6,000.
Step 2: Record the cost of goods sold (COGS). The inventory sold had a cost of \$3,000. To reflect this expense, you debit the Cost of Goods Sold account for \$3,000.
Step 3: Reduce the Inventory account. Since the inventory costing \$3,000 has been sold, you need to credit the Inventory account for \$3,000 to decrease its balance.
Combine the entries: The journal entry will include (1) Debit Cash \$6,000, Credit Sales Revenue \$6,000, (2) Debit Cost of Goods Sold \$3,000, and Credit Inventory \$3,000. This ensures both the revenue and expense sides of the transaction are properly recorded.
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