A computer manufacturer recently shipped several laptops to a customer (cost: $25,000) and billed the customer $30,000. Which of the following options correctly expresses the accounts that are debited and credited to record this transaction?
A) Debits: Accounts Receivable, Finished-Goods Inventory; credits: Sales Revenue, Cost of Goods Sold.
B) Debits: Accounts Receivable, Cost of Goods Sold; credits: Sales Revenue, Finished-Goods Inventory.
C) Debits: Sales Revenue, Cost of Goods Sold; credits: Accounts Receivable, Finished-Goods Inventory.
D) Debits: Sales Revenue, Finished-Goods Inventory; credits: Accounts Receivable, Cost of Goods Sold.
E) Debits: Accounts Receivable; credits: Finished-Goods Inventory, Profit on Sale.

Question

Quizplus · Accepted Answer

The correct entry to record this transaction involves debiting Accounts Receivable for the sale amount ($30,000) to recognize the revenue expected to be received, and debiting Cost of Goods Sold for the cost of the laptops ($25,000) to recognize the expense related to the sale. The credits are to Sales Revenue for the sale amount ($30,000) to recognize the income earned from the sale, and to Finished-Goods Inventory for the cost of the laptops ($25,000) to remove the cost of the sold goods from inventory.

A Computer Manufacturer Recently Shipped Several Laptops to a Customer