QA5C-ITI - Horngren'S Financial And Managerial Accounting

Question

Question: Click Computers has the following transactions in July related to the sale of merchandise inventory.

July 12 Sold computers on account for \(8,000 to a customer, terms 3/15, n/30. The cost of the computers is \)4,800. Click uses the gross method for recording sales revenue.

26 Received payment from the customer on balance due.

Journalize the sales transactions for Click Computers assuming the company uses the perpetual inventory system.

 

Step-by-Step Solution

Answer

Answer

The total of debits and credits is $20,800.

Step 1: Meaning of Sales

In accounting, the term sales refer to the process of transferring the ownership associated with the goods or services. Under such a process, the seller transfers the ownership in the buyer’s favor against a predetermined amount of consideration.

Step 2: Preparation of journal entries

Date	Accounts and Explanation	Debit ($)	Credit ($)
Jul 12	Accounts receivable	8,000
	Sales revenue		8,000
	(To record the sales on account)
Jul 12	Cost of goods sold	4,800
	Merchandise inventory		4,800
	(To record the cost of goods sold)
Jul 26	Cash	8,000
	Accounts receivable		8,000
	(To record the receipt of payment)