Bayer Company uses the periodic inventory system. Bayer Company sold goods on ac

Question

Bayer Company uses the periodic inventory system. Bayer Company sold goods on account with a retail price of $800 and a cost of $500. What journal entries are prepared?

. A. debit Accounts Receivable for $ 500 and credit Sales Revenue for $ 500 .

B. debit Inventory for $ 500 and credit Purchases for $ 500 .

C. debit Accounts Receivable for $ 800 and credit Sales Revenue for $ 800 , debit Cost of Goods Sold for $ 500 and credit Inventory for $ 500 .

D. debit Accounts Receivable for $ 800 and credit Sales Revenue for $ 800 .

Explanation / Answer

Answer is (c)

Sale of inventory will result in decrease in inventory as such inventory will be credited with cost which is $ 500 against which expense would be recorded in the form of cost of goods sold.

Since goods are sold at $ 800, the sales revenue would be credited with this amount and a accounts receivable account would be debited with this amount reflecting current asset of the company.

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