Question

On December 12, 2021, Pace Electronics received $25,200 from a customer toward a cash sale of $252,000 of diodes to be completed on January 16, 2022. What journal entries should Pace record on December 12 and January 16

Answer 1

Answer:

(a) Debit Cash for $25,200; Credit Deferred sales revenue for $25,000.

(b) Debit Cash for $2,26,800; Debit Deferred sales revenue for $25,200; and Credit Sales revenue for $252,000.

Explanation:

(a) What journal entries should Pace record on December 12?

The receipt of part-payment of $25,200 from a customer on December 12, 2021 creates a deferred sales revenue which will appear as under current liabilities. The journal entries that Pace should record on December 12, 2021 will therefore look as follows:

Date                Account Title                            Dr ($)              Cr ($)            

12 Dec '21       Cash                                        25,200

                          Deferred sales revenue                             25,200

                      (To record a deferred sales revenue from diodes.)                  

(b) What journal entries should Pace record on January 16?

On this date, the customer will pay the remaining amount. The amount in the Deferred sales revenue account will now be transferred to the Sales Revenue account and there will be no liability again. The journal entries that Pace should record on January 16, 2022 will therefore look as follows:

Date                Account Title                            Dr ($)                Cr ($)            

16 Jan '22       Cash (w.1)                                 2,26,800

                       Deferred sales revenue             25,200

                          Sales revenue                                                252,000

                      (To record sales revenue from diodes.)                       

Workings:

w.1: Cash = Sales revenue - Deferred sales revenue = $252,000 - $25,200 = $2,26,800