Question

inventory costing 60,000 was sold for 100,000. Eighty percent of the sales were for cash. If you do this question on a cash basis how you would do it versus if you had to do it from an accrual basis.

Answer 1

	Cash Basis	Accrual Basis
Sales Revenue	$                80,000	$         1,00,000
	($100000*80%)
Less:
Cost Of Goods Sold	$                48,000	$             60,000
	($60000*60%)
Gross Margin	$                32,000	$             40,000
Journal Entries - Cash Basis
	Debit	Credit
Cash	$                80,000
Sales Revenue		$             80,000
(sales recorded)
Cost Of Goods Sold	$                48,000
Inventory With Customer	$                12,000
Inventory		$             60,000
Journal Entries - Accrual Basis
	Debit	Credit
Cash	$                80,000
Account Receivables	$                20,000
Sales Revenue		$         1,00,000
(to record sales)
Cost Of Goods Sold	$                60,000
Inventory		$             60,000