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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Calculation of Revenue

Wallace Motors buys and sells used cars. Wallace made the following sales during January and February:

a. Three cars were sold to Russell Taxi for a total of $75,000; the cars were delivered to Russell on January 18. Russell paid Wallace $20,000 on January 18 and the remaining $55,000 on February 12.

b. One car was sold to Hastings Classics for $28,000. The car was delivered to Hastings on January 25. Hastings paid Wallace on February 1.

Required:

Calculate the monthly revenue for Wallace for January and February.

To determine

Sales Revenue:

The sales revenue is said to be earned when the sale is completed. The sale is considered complete when the performance obligation is satisfied i.e. the delivery is made to the customer.

To calculate:

The monthly revenue for January and February.

Explanation

The Wallace Motors buys and sells used cars. Three cars sold to Russell for $75,000 and the delivery was made on January 18. The payment is made in two installments i.e. one on January 18 of amount $20,000 and the other on February 12 of amount $55,000. One more car was sold to Hastings for $28,000 and the delivery is made on January 25 and payment was received on February 1. This is given in the question.

Journal entry for recording sales revenue:

Date Particulars Debit Credit
Jan. 18 Accounts Receivables $75,000  
  Revenue   $75,000
  (Record of sale to the Russell)    
Jan

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