Question

The following activity occurred during May 2016 for ABC Inc.:

Date	Description
May 1	Owner invested $145,000 in cash in exchange for 1,000 shares of $1 par common stock.
May 4	Company sold $5,000 worth of goods. Customer paid half cash and half on account. The merchandise sold had a cost to the company of $3,500.
May 6	Accepted $500 of advance payments from customers for services to be provided next month.
May 27	Received a utility bill for $450. Payment is due in 30 days. The company decides to wait exactly 30 days to pay.
May 29	Mr. Jones paid in full the outstanding debt he had with the company.
May 31	The company declares a stock split.

Using the information above, what journal entry would be required to record the transaction of May 4?

Select one:

a.

Cash		$2,500
Accounts Receivable		$2,500
Cost of Goods Sold		$3,500
	Revenue		$5,000

b.

Cash		$2,500
Accounts Receivable		$2,500
Cost of Goods Sold		$3,500
	Inventory		$3,500
	Revenue		$5,000

c.

Cash		$5,000
Cost of Goods Sold		$3,500
	Inventory		$3,500
	Revenue		$5,000

d.

Cash		$2,500
Accounts Receivable		$2,500
	Revenue		$5,000

Answer 1

	Journal entries in the books of ABC Inc.
Date	Account's tittle	Debit $	Credit $
4-May	Cash ( $ 5,000 x 50%)	2,500
	Accounts Receivable	2,500
	Sales Revenue		5,000
	Cost of goods sold	3,500
	Inventory		3,500