1.
Prepare necessary
1.
Explanation of Solution
Account receivable:
The amount of money to be received by a company for the sale of goods and services to the customers is referred to as account receivable.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Accounts receivable | 70,000 | ||
Sales revenue | 70,000 | ||
(To record the sale made ) |
Table (1)
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $70,000.
- Sales revenue is component of
stockholder’s equity and there is an increase in the value of revenue. Hence, credit the sales revenue by $70,000.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Cash (1) | 45,080 | ||
Sales revenue | 920 | ||
Accounts receivable | 46,000 | ||
(To record the collection received on December 18, 2019) |
Table (2)
- Cash is an asset and there is an increase in the value of asset. Hence, debit the cash by $45,080.
- Sales revenue is component of stockholder’s equity and there is a decrease in the value of revenue. Hence, debit the sales revenue by $920.
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $46,000.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Cash | 18,000 | ||
Accounts receivable | 18,000 | ||
(To record the additional collection on the sales made) |
Table (3)
- Cash is an asset and there is an increase in the value of asset. Hence, debit the cash by $18,000.
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $18,000.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Return liability | 1,500 | ||
Accounts receivable | 1,500 | ||
(To record the sales returns on credit merchandise) |
Table (4)
- Return liability is a liability and there is a decrease in the value of liability. Hence, debit the liability by $1,500.
- Accounts receivable is an asset and there is a decrease in the value of asset. Hence, credit the asset by $1,500.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
No entry is required for the bank error | |||
Table (5)
Date | Account Titles and explanation | Debit ($) | Credit ($) |
No entry is required for the bank error | |||
Table (6)
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Cash | 4,500 | ||
Accounts receivable(2) | 4,500 | ||
(To record the additional collection on the sales made) |
Table (7)
- Cash is an asset and there is an increase in the value of asset. Hence, debit the cash by $4,500
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $4,500.
Working note:
(1) Calculate the cash to be received on sales made.
(2) Calculate the amount of accounts receivable.
Note: In this case,
2.
Prepare necessary journal entries for the given transaction assuming that accounts receivable and sales are recorded at net price by the Company L.
2.
Explanation of Solution
Account receivable:
The amount of money to be received by a company for the sale of goods and services to the customers is referred to as account receivable.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Accounts receivable | 68,600 | ||
Sales revenue | 68,600 | ||
(To record the sale made ) |
Table (8)
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $68,600.
- Sales revenue is component of stockholder’s equity and there is an increase in the value of revenue. Hence, credit the sales revenue by $68,600.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Cash | 45,080 | ||
Accounts receivable | 45,080 | ||
(To record the additional collection on the sales made) |
Table (9)
- Cash is an asset and there is an increase in the value of asset. Hence, debit the cash by $45,080.
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $45,080.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Cash | 18,000 | ||
Sales revenue | 360 | ||
Accounts receivable | 17,640 | ||
(To record the collection received on sale made) |
Table (10)
- Cash is an asset and there is an increase in the value of asset. Hence, debit the cash by $18,000.
- Sales revenue is component of stockholder’s equity and there is an increase in the value of revenue. Hence, debit the sales revenue by $17,640.
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $360.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Return liability | 1,470 | ||
Accounts receivable | 1,470 | ||
(To record the sales returns on credit merchandise) |
Table (11)
- Return liability is a liability and there is a decrease in the value of liability. Hence, debit the liability by $1,470
- Accounts receivable is an asset and there is a decrease in the value of asset. Hence, credit the asset by $1,470.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Accounts receivable | 90 | ||
Sales revenue | 90 | ||
(To record the sale made ) |
Table (12)
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $90.
- Sales revenue is component of stockholder’s equity and there is an increase in the value of revenue. Hence, credit the sales revenue by $90.
Date | Account Titles and explanation | Debit ($) | Credit ($) |
No entry is required | |||
Table (13)
Date | Account Titles and explanation | Debit ($) | Credit ($) |
Cash | 4,500 | ||
Accounts receivable(2) | 4,500 | ||
(To record the additional collection on the sales made) |
Table (14)
- Cash is an asset and there is an increase in the value of asset. Hence, debit the cash by $4,500
- Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $4,500.
3.
Compute the account receivable balance that will be reported on the balance sheet Company L’s as on December 31, 2019, when the accounts receivable and sales are recorded at
(a) Gross price
(b) Net price
3.
Explanation of Solution
(a) Compute the account receivable balance that will be reported on the balance sheet Company L’s as on December 31, 2019, when the accounts receivable and sales are recorded at gross price.
(b) Compute the account receivable balance that will be reported on the balance sheet Company L’s as on December 31, 2019, when the accounts receivable and sales are recorded at net price.
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Chapter 6 Solutions
Intermediate Accounting: Reporting And Analysis
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