On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. The journal entry or entries that Klein will make on March 12 is:

Question

Quizplus · Accepted Answer

The journal entry to record the sale on March 12 using the gross method is:
Accounts receivable - Babson Company   9,800
Sales                                           9,800
Cost of goods sold                     5,500
Inventory                                      5,500

Option A is incorrect because it only records the debit to accounts receivable and the credit to sales.
Option C is incorrect because it records the cost of goods sold as a debit to inventory instead of a credit.
Option D is incorrect because it records an incorrect amount for the credit to sales.
Option E is incorrect because it records the cost of goods sold as a debit to sales instead of a separate entry.