Question

On May 1, Shilling Company sold merchandise in the amount of $5,800 to Anders, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Shilling uses the perpetual inventory system and the gross method. The journal entry or entries that Shilling will make on May 1 is:

Answer 1

Two journal entries would be posted on May 1 which are as follows:
Date	Account Title	Debit ($)	Credit ($)	Explanation
May 1	Accounts Receivable a/c … Dr	$5,800		Since the sale is made on credit, Accounts receivable a/c is debited
	To Sales a/c		$5,800	Following the rule of crediting all incomes, Sales a/c is credit. Further, since the gross method is followed, the sales value is to be recorded without recording any discount i.e. $5,800
	(Being sales to Anders on credit recorded)
May 1	Cost of goods sold a/c … Dr	$4,000		All expenses are to be debited and the cost of goods sold is an expense. Hence, the same has been debited
	To Merchandise Inventory a/c		$4,000	Since the inventory is being sold, merchandise inventory a/c is credited to record a reduction in the inventory.
	(Being cost of goods recorded on sales made)