Drum Company, purchases 66 units of inventory on account on March 1 for $6 per u

Question

Drum Company, purchases 66 units of inventory on account on March 1 for $6 per unit. What journal entry does the company need to make to record this transaction on March 1? Dr Inventory 396 Cr Accounts Payable 396 What effect does this transaction have on the accounting equation? Assets= Liabilities + Equity IncreaseIncrease No Change On March 9, Drum Company sells 33 of the inventory on account for $22 each. What journal entries should the company make on March 9 to record this transaction? 726 Accounts Receivable Sales Cr Cost of Goods Sold Cr Inventory Dr 726 Dr 726 726 What effect does this transaction have on the accounting equation? AssetsiabitiesEquity Increase No Change Increase

Explanation / Answer

Answer

* You have correctly recorded first journal entry.

* only second entry (journal entry) part is wrong.

* Cost of goods sold is debited by [no. of units sold x cost at which they are purchases]

* Correct set of journal entries are:

Working Account title Debit Credit [33 drums x $22 each] Dr Accounts receivables $             726.00 [33 drums x $22 each] Cr Sales $                      726.00 (merchandise sold at $22 each) [33 drums x $6 each] Dr Cost of Goods Sold $             198.00 [33 drums x $6 each] Cr Inventory $                      198.00 (inventory adjusted with cost of goods sold of $6 each)

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