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Arrieta Auto Sales neglected to record ANY entries relating to transactions involving six sport utility vehicles (SUVs) purchased for its inventory in November, 2014. The purchase price for each SUV was $22,000 and Arrieta Auto paid its supplier in cash. Four of the SUVs were sold to customers in December, 2014 at a price of $37,000. The remaining vehicles were still available for sale in the Arrieta Auto customer showroom at the end of December, 2014.

How would you correct this journal entry/entries:

a.

Record the purchase of inventory

Debit: Inventory (+A) $132,000

Credit: Cash (-A) $132,000

Record Revenue and Cost of Goods Sold from the sale of four SUVs

Debit: Cash (+A) $148,000

Credit: Sales (+R, +SE) $148,000

Debit: Cost of goods sold (+E, -SE) $88,000

Credit: Inventory (-A) $88,000

b.

Record the purchase of inventory

Debit: Inventory (+A) $132,000

Credit: Cash (-A) $132,000

Record Revenue and Cost of Goods Sold from the sale of four SUVs

Debit: Cash (+A) $148,000

Credit: Sales (+R, +SE) $148,000

c.

Record the purchase of inventory

Debit: Inventory (+A) $132,000

Credit: Cash (-A) $132,000

Record Revenue and Cost of Goods Sold from the sale of four SUVs

Debit: Accounts Receivable (+A) $148,000

Credit: Sales (+R, +SE) $148,000

d.

No correcting entry is needed at this time.

*** Please explain why the answer is correct, and why the other options are not correct

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