Question

Wildlife Wholesale Supply sold birdseed to a retailer for $2,060, receiving cash at the time of sale. The cost of the birdseed was $1,570. When recording the collection from the customer, in its cash receipts journal, Wildlife would enter Multiple Choice $2,060 in the Cash Dr. column and $2,060 in the Accounts Receivable Cr. column. $1,570 in the Cash Dr. column and $1,570 in the Accounts Receivable Cr. column. $2,060 in the Cash Dr. column; $2,060 in the Sales Cr. column, and $1,570 in the Other Accounts Cr column

Answer 1

(1)

OPTION: $2,060 in the Cash Dr column: $2060 in the Sales Cr column and 51.570 in the Cost of Goods Sold Dr/Inventory Cr column

EXPLANATION:

This is the cash sale which requires cash account to be debited with the cash received and sales account credited with the same account. Cost of goods sold is debited with the cost of goods sold and by the same amount inventory account is credited.

(2)

OPTION: $17000 in the Inventory Dr column, $16,830 in the Accounts Payable Cr column and $170 in the Purchase Discount Cr. column

EXPLANATION:

purchase on credit involves debit of inventories because they are received in business and credit with the new liability created. Gross method does not record inventory purchased at net of purchase discount.