Question

On January 1, 2015 Outback Subaru Limited, a Subaru dealership in Alice Springs, sold 2 cars to the town for $50,000 total. Outback had paid $37,000 to purchase the cars. The town was granted credit terms and permitted to pay in 30 days.On the same day of the sale, Outback Subaru Limited delivered the cars to the town. Consider both the revenue and cost of this transaction on the books of Outback Subaru Limited.What would be the impacton January 1, 2015, the date of the sale?On January 30, 2015 Outback Subaru Limited received payment in full from the town for the cars.What would be the impact of this transaction on this date?

Answer 1

Answer:

What would be the impact on January 1, 2015, the date of the sale?

The following journal entries should be made to register the sale:

January 1, 2015: 2 cars are sold

• Dr Cost of Goods Sold 37,000
• Cr Merchandise Inventory 37,000

• Dr Accounts Receivable 50,000
• Cr Sales Revenue 50,000

On January 30, 2015 Outback Subaru Limited received payment in full from the town for the cars.  What would be the impact of this transaction on this date?

The following journal entry should be made to register the payment:

January 30, 2015: the local government paid the cars

• Dr Cash 50,000
• Cr Accounts Receivable 50,000