Que Corporation uses a process cost accounting system. The company manufactured certain goods at a cost of $800 and sold them on credit to Are Corporation for $1,075. The complete journal entry to be made by Que at the time of this sale is:
A) Debit Accounts Receivable $1,075; credit Sales $1,075; debit Cost of Goods Sold $800; credit Finished Goods Inventory $800.
B) Debit Accounts Receivable $1,075; credit Sales $275; credit Finished Goods Inventory $800.
C) Debit Cost of Goods Sold $1,075; credit Sales $1,075.
D) Debit Finished Goods Inventory $800; debit Sales $1,075; credit Accounts Receivable $1,075; credit Cost of Goods Sold $800.
E) Debit Accounts Receivable $1,075; debit Selling expense $800; credit Sales $1,075; credit Cost of Goods Sold $800.

Question

Quizplus · Accepted Answer

In a process cost accounting system, the cost of goods sold is recorded by debiting the cost of goods sold account and crediting the finished goods inventory account. At the same time, the sale is recorded by debiting the accounts receivable account and crediting the sales account. Therefore, the complete journal entry for Que Corporation's sale of goods to Are Corporation is: 
Debit Accounts Receivable $1,075 
Credit Sales $1,075 
Debit Cost of Goods Sold $800 
Credit Finished Goods Inventory $800.

Que Corporation Uses a Process Cost Accounting System