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Gloria Inc. ships 5 machines to a customer at $5,550 per machine. The total cost for Gloria Inc. is $26,250 and payment is due in 60 days.?

 No cash changes hands at delivery. The accounting treatment related to this transaction at the time of shipment most likely includes:

A. accounts receivable and revenue increased by $27,750 and inventory decreased by $26,250..

B. revenue increased by $5,550, cost of goods sold decreased by $26,250 and cash remains unchanged.

C. accounts receivable and revenue increased by $27,750 and inventory and cost of goods sold decreased by $26,250.

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Question added by Shahbaz Hayder , Group Head of Finance , Sharif Group of Companies
Date Posted: 2015/07/08
Shahbaz Hayder
by Shahbaz Hayder , Group Head of Finance , Sharif Group of Companies

Yes Option A is the right answer.

Zehab Osman
by Zehab Osman , Accountant , Aldar Consultancy Co.

A-------------------------------------------------------

Shazia Anees
by Shazia Anees , Assistant Manager Finance , Arham Trading Company

OPTION A==================

Yasir Khilji
by Yasir Khilji , GROUP INTERNAL AUDIT MANAGER , Hamdan Trading Group LLC

A. is correct will be treated as credit sales

Michael Lagunday
by Michael Lagunday , Accountant , Dubai Camel Racing Club

My answer is A. Revenue and accounts receivable will increase by $27,750 and decrease inventory by $26,250.

Mark Angelo Damuag
by Mark Angelo Damuag , Financial Analyst , Evacare Management Consultancy Inc

Answer is A. accounts receivable and revenue increased by $27,750 and inventory decreased by $26,250..

Ahmer Zamir
by Ahmer Zamir , Consultant , Saleem Associates & Co

The correct option is A) accounts receivable and revenue is increased by $27,750 and inventory decreased by $26,250

The rational of the option is that Gloria Inc is shipping machines on60 days credit term ,so that accounts receivables or revenue is increasing by total invoice value $27,750(5 machines @ $5,550 per machines) and on the other side inventory is being decreased by $26,250.There isn't any involvement of cash or any cash in lay so that cash will remain unchanged

By selling of a product or invrntory  the cost of  goods sold or the cost of sales is increased instead of decreased because it is the cost of selling inventory if the sales increases then it cost will increase.The formula of cost of goods sold = Opening Inventory +Purchases(Cost of goods manufactured)-Ending Inventory . by selling ending inventory will decrease as a result cost of goods sold will increase. 

Falah Musthafa
by Falah Musthafa , Audit Executive , MIM International Consultancies

A. Accounts Receivable and Revenue increases by $27,750/- and inventory decreases by $26,250/-, shipping cost will also be added to cost of goods sold.

Saurabh Aggarwal
by Saurabh Aggarwal , Associate Manager , Ernst & Young LLP

Correct answer is option (A). Revenue and accounts receivable will increase by27750 $ and inventory will decrease by26250 $. 

Note: While calculating the net income / net profit, cost of26250 $ will be included in Cost of Goods Sold.

Sadiq Sheik Ahamed
by Sadiq Sheik Ahamed , Senior Accountant , Avedis Infosystems Pvt Ltd

Answer is A.5550*5=27750 AR & Sales Increases inventory is decreased by26,250 

ZAKKER HUSSAIN KUNNUMPURATHU
by ZAKKER HUSSAIN KUNNUMPURATHU , Finance Manager , Subaru kenya

the Answer is A. the AR and Revenue increase by  27750.00 (5550*5) and inventory decreased by its cost that is26250.

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