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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Using the information in RE17-13, what journal entry would CoolShoes make to record the sale of 100 pairs of RE17 shoes on account to a retailer?

To determine

Journalize entry to record the sale of 100 pairs of RFI7 shoes on account to a retailer.

Explanation

Contract: Contract is an agreement among two parties or more parties which includes enforceable obligations and rights. A contract can be “written oral or implied” by ordinary business practices.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Accounting rules for Journal entries:

  • To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
  • To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.

Prepare journal entry:

DateAccount title and explanationDebit ($)Credit ($)
 Accounts receivable (1)12,500 
     Rebate liability (2)1,200
      Sales revenue (Balancing figure) 11,300
      (To record the amount of sale on account)  

Table (1)

  • Accounts receivable is an asset and it is increased. Therefore, debit accounts receivable account by $12,500.
  • Rebate liability is a liability and it is increased. Therefore, credit rebate liability account by $1,200.
  • Sales revenue is a component of stockholders’ equity and it is increased. Therefore, credit stockholders’ equity account by $11,300...

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