Answer & Explanation:
Req. A
Journal Entries
a. Debit Inventory $250,000
Credit Cash $90,000
Credit Accounts payable $160,000
Note: Purchase of raw materials with cash and on account.
b. Debit Wages expense $184,000
Credit Cash $180,300
Credit Wages payable $3,700
Note: Total salary (180,300 + 3,700)= 184,000 usd. 180,300 were charged over the course of the year, $3,700 only being compensated, thereby the responsibility (salaries payable).
c. Debit Cash $500,000
Debit Accounts receivable $250,000
Credit Sales revenue $750,000
Note: Offer cash and on account to consumers pillows.
Since the company is a sales business, the expense of the products sold must be registered.
Debit Cost of goods sold $485,000
Credit Inventory $485,000
d. Debit Utilities expense $17,200
Credit Cash $17,200
e. Debit Cash $70,000
Credit Unearned revenue $70,000
Note: If the service is done in the future and cash is earned now, taxes are reported on an accrual basis as earned, not when the service is conducted.
f. Debit Utilities expense $1,930
Credit Utilities payable $1,930
Note: As it is unpaid, a liability will arise.
Req. B
Accrual accounting framework provides owners, borrowers and other consumers with more accurate and powerful knowledge. This shows distinctly the savings, profits and obligations of the company against its internal and external employees. Owing to the fact that all documents (whether charged or not) were kept independently under an accrual accounting.
