[jackabigail]

You purchase 10,000 inventory and paid 4000 cash. Then you sell $2000 of inventory, the inventory is valued at $300. I got confused about how to do this journal entry?

inventory 10,000 Cash CGS

cash 4000 Revenue Inventory

A/P 6000

[GuitarSalad]

2 separate entries (if I got the facts of the question right):

For the purchase:

Inventory 10,000

Cash (4,000)

A/P (6,000)

For the sale:

A/r or Cash 2,000

Inventory (300)

Revenue/Sales (1,700)

BEC 7/12/13 - 84
AUD 8/31/13 - 86
REG 4/11/14 - 84
FAR 5/30/14 - 88

Licensed AZ CPA - 10/2014

[AJG38]

Hi jack I agree with guitar on the first entry but I believe the second should be as follows:

Dr. COGS 300

Cr. inventory 300

Dr. Cash/AR 2000

Cr. Sales Revenue 2000

AUD - 91 (4/7/2015)
BEC - 88 (4/29/2015)
FAR - 80 (5/29/2015)
REG - 70 (8/18/2015); 82 (11/08/2015)

Gleim & Ninja Flashcards

[jackabigail]

Thanks, guys.

Ajg 38, the ledgers given for the sales part is the same as yours. I just got confused 'cause of the value changes

[GuitarSalad]

Crap, Ajg38 is definitely right for the revenue portion and the COGS. (Forgive me, I've been doing nothing but fixed assets the last 3 years.)

BEC 7/12/13 - 84
AUD 8/31/13 - 86
REG 4/11/14 - 84
FAR 5/30/14 - 88

Licensed AZ CPA - 10/2014

[jackabigail]

Why COGS is 300? My professor said COGS is the cost you purchased the inventory regardless of current value, you always record it by using historic value , which is 2000

[Anonymous]

The cost (purchase price) of the inventory was/is $300. You received $2000 for the actual purchase.

[stoleway]

Purchase of inventory

Inventory………10,000dr

Cash………………………………..4000cr

AP……………………………………6000cr

Sale

AR/CASH……..2000dr

Sales…………………………………2000cr

Cogs…………….300dr

Inventory…………………………….300cr

Closing the books

Sale………………2000dr

Cogs…………………………………300cr

Gross profit…………………………1700cr

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[Missy]

Is the question rephrased in your own words? Are you making a sale of $2,000 or selling $2,000 worth of inventory?

Its the wording of your original question that is confusing. If you're billing the customer $2,000 for $300 worth of inventory the examples above are correct. If you are literally selling inventory that was purchased for $2000 the second entry would be to dr COGS $2,000 and cr inventory $2,000 with the revenue and receivables/cash portion of the J/E unknown.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Author]

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