Accounting Essentials: Debits and Credits in Inventory Transactions Quiz

1. Purchase calculators from Abacus Co. at a total cost of $1,650, terms n/30. What is the correct journal entry for this transaction?

Sales $1,650; Cash $1,650

Inventory $1,650; Cash $1,650

Accounts Receivable $1,650; Accounts Payable $1,650

When purchasing calculators on credit, the correct journal entry is to debit Inventory account for $1,650 and credit Accounts Payable for $1,650. This reflects an increase in inventory (asset) and an increase in accounts payable (liability) on the balance sheet.

Explanation

When purchasing calculators on credit, the correct journal entry is to debit Inventory account for $1,650 and credit Accounts Payable for $1,650. This reflects an increase in inventory (asset) and an increase in accounts payable (liability) on the balance sheet.

2. Paid freight of $50 on calculators purchased from Abacus Co.

Salaries Expense $50; Utilities Expense $50

Freight Expense $50; Accounts Payable $50

Office Supplies $50; Accounts Receivable $50

When paid freight on calculators purchased, it increases the cost of inventory and decreases cash accordingly. The correct journal entry reflects this transaction.

Explanation

When paid freight on calculators purchased, it increases the cost of inventory and decreases cash accordingly. The correct journal entry reflects this transaction.

3. Returned calculators to Abacus Co. for $66 credit because they did not meet specifications.

Retained Earnings $66; Cost of Goods Sold $66

Cash $66; Accounts Receivable $66

Sales Revenue $66; Supplies Expense $66

When returning items that didn't meet specifications, Accounts Payable is credited to reduce the amount owed and Inventory is debited to reflect the decrease in inventory value.

Explanation

When returning items that didn't meet specifications, Accounts Payable is credited to reduce the amount owed and Inventory is debited to reflect the decrease in inventory value.

4. Sold calculators costing $520 for $690 to Union Book Store, terms n/30.

When calculators are sold at a higher price, the difference between the selling price and the cost of goods sold gives the sales revenue. The cost of goods sold reflects the cost of the inventory sold. Accounts Payable and Cash are not impacted by this transaction directly.

Explanation

When calculators are sold at a higher price, the difference between the selling price and the cost of goods sold gives the sales revenue. The cost of goods sold reflects the cost of the inventory sold. Accounts Payable and Cash are not impacted by this transaction directly.

5. Granted credit for $45 to Union Book Store for the return of one calculator that was not ordered. The calculator cost $34.

Sales Returns & Allowance $34 Accounts Receivable $34 Inventory $45 Cost of Goods Sold $45.

Sales Returns & Allowance $45 Accounts Receivable $45 Inventory $34 Cost of Goods Sold $11.

Sales Returns $34 Accounts Receivable $45 Inventory $34 Cost of Goods Sold $11.

The correct entry for the transaction involves recognizing a sales return and granting a credit, adjusting the accounts receivable, and adjusting the inventory and cost of goods sold based on the returned calculator price.

Explanation

The correct entry for the transaction involves recognizing a sales return and granting a credit, adjusting the accounts receivable, and adjusting the inventory and cost of goods sold based on the returned calculator price.

6. Sold calculators costing $570 for $760 to Commons Card Shop, terms n/30. What is the correct journal entry to record this transaction?

Accounts Receivable $760, Sales Revenue $760, Inventory $570, Cost of goods sold $570

Inventory $570, Cost of goods sold $570, Accounts Receivable $760, Sales Revenue $760

Inventory $760, Cost of goods sold $760, Accounts Receivable $570, Sales Revenue $570

The correct journal entry to record the sale of calculators costing $570 for $760 to Commons Card Shop includes debiting Inventory for $760 and Cost of goods sold for $760, while crediting Accounts Receivable for $570 and Sales Revenue for $570.

Explanation

The correct journal entry to record the sale of calculators costing $570 for $760 to Commons Card Shop includes debiting Inventory for $760 and Cost of goods sold for $760, while crediting Accounts Receivable for $570 and Sales Revenue for $570.