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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Prepare entries in general journal form to record the following:

June 12    Sold merchandise on account to K. Perrot; terms n/30; $1,740.

July 12        Received $740 in cash from K. Perrot and a 60-day, 7 percent note for $1,000, dated July 12.

Aug. 17    Discounted the note at the bank at 7.5 percent.

Check Figure

8/17 Cash, $1006.61

To determine

Prepare the journal entries.

Explanation

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

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare the journal entries.

Transaction on June 12:

Date Account Titles and Explanation Post Ref. Debit ($) Credit ($)
June 12 Accounts Receivable, KP   1,740  
      Sales     1,740
    (Record goods sold on account)      

Table (1)

Description:

  • Accounts Receivable, KP is an asset account. The amount is increased because amount to be received increased, and an increase in asset is debited.
  • Income from Services is a revenue account. Since gains and revenues increase equity, and an increase in equity is credited, Income from Services account is credited.

Transaction on July 12:

Date Account Titles and Explanation Post Ref. Debit ($) Credit ($)
July 12 Cash   740  
    Notes Receivable   1,000  
       Accounts Receivable, KP     740
    (Record cash received and note received in settlement of account receivable)      

Table (2)

Description:

  • Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
  • Notes Receivable is an asset account. The amount to be received increased, and an increase in asset is debited.
  • Accounts Receivable, KP is an asset account. Since accounts receivable is settled by receipt of note, amount to be received decreased, and a decrease in asset is credited.

Transaction on August 17:

Date Accounts and Explanation Post Ref. Debit ($) Credit ($)
August 17 Cash   1,006.61  
                Notes Receivable     1,000.00
      Interest Income     6.61
    (Record principal and interest collected on note)      

Table (3)

Description:

  • Cash is an asset account...

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