7.Question 7

A company sells its products to a customer for $5,000 on account. The cost of the products sold is $2,000. Select the journal entries that are correct (assuming no other transactions).

(1) Accounts Receivable (A) (inc) 5,000

...Retained Earnings (OE) (revenue) (inc) 5,000

(2) Retained Earnings (OE) (COGS) (dec) 2,000

...Inventory (A) (dec) 2,000

(3) Accounts Receivable (A) (inc) 5,000

...Inventory (A) (dec) 2,000

...Retained Earnings (OE) (Net Earnings) (inc) 3,000

(4) Retained Earnings (OE) (COGS) (dec) 5,000

...Inventory (A) (dec) 5,000

(5) Accounts Receivable (A) (inc) 2,000

...Retained Earnings (OE) (revenues) (inc) 2,000

(1) and (4)

(1) and (2)

(2) and (5)

(3)

Please explain