Question

A firm just made a $1,000,000.00 sale to a retail chain. The firm will be 50.00% in cash today, and then pay the remainder in 30 days (a receivable for the firm). The firm fills the sale with $400,000.00 in inventory. Consider how an accountant will handle this transaction.

A.) Revenues will be adjusted by ___________________

B.) Accounts receivable will be adjusted by ______________

C.) Cash will be adjusted by ________________

D.) Inventory will be adjusted by _________________

E.) If COGS is 40% of sales, COGS will be adjusted by _________________

Answer 1

When company makes sales to customer then at the most 5 accounts would be adjusted. Sales revenue is adjusted for the amount of sales, cash or accounts receivable would increase depending on whether the sale is on cash or credit.
The other entry to be reported would be to record the expense that is value of goods sold and so expenses that is cost of goods sold would be adjusted and inventory account would be adjusted as inventory is sold.
a.
Firm has made sales of $1,000,000 and so the revenues will be adjusted by $1,000,000 as increase in revenue for sales made in to retail chain.
b.
Firm has made 50% of sale on credit and so 50% of $1,000,000 would give $500,000 and so accounts receivable would be adjusted by $500,000 for increase in value.
c.
Firm has made 50% of sale in cash and so 50% of $1,000,000 would give $500,000 and so cash would be adjusted by $500,000 for increase in value.
d.
Company has sold goods worth $400,000 and so inventory would be adjusted by $400,000 for decrease in value.
e.
The cost of goods sold is 40% of sales and so 40% of $1,000,000 would give $400,000 and so Cost of goods sold would be adjusted by $400,000 for increase in value.