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Intermediate Accounting: Reporting...

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

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Long Corporation is a fabric manufacturing company. On January 20, Long made sales to Lyndsay’s Lace in the amount of $15,000 with terms of 2/10, n/30. Lyndsay’s paid Long on January 28. Long records accounts receivable and sales using the gross price method. Prepare the related journal entries for Long.

To determine

Record the journal entries.

Explanation

Accounts receivable:

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Prepare journal entries:

DateAccount Title and ExplanationDebitCredit
 Accounts receivable$15,000 
      Sales revenue $15,000
 (To record the sale on credit)  

Table (1)

  • An increase in accounts receivable (asset) is debited with $15,000.
  • An increase in sales revenue (increases stockholders’ equity) is credited with $15,000.
DateAccount Title and ExplanationDebitCredit
 Cash (2)$14,700 
 Sales revenue (1)$300 
      Accounts receivable $15,000
 ( To record payment received)  

Table (2)

  • An increase in cash (asset) is debited with $14,700.
  • An increase in sales revenue (increase in stockholders’ equity account) is debited with $300...

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