Question

Use the five transactions below for Hennigan Rentals to answer the questions that follow. Dec. 1 Hennigan purchases two new saws on credit at $375 each. The saws are added to Hennigan's rental inventory. Payment is due in 30 days. 8 Hennigan accepts advance deposits for tool rentals of $75. 15 Hennigan receives a bill from Farmer's Electric Company for $150. Payment is due in 30 days. 20 Customers are charged $750 by Hennigan for tool rentals. Payment is due from the customers in 30 days. 31 Hennigan receives $500 in payments from the customers that were billed for rentals on December 20. refer to the transactions for hennigan rentals. based on the above transactions, how much is still owed to hennigan on december 31 from its customers?

Answer 1

Answer:

Hennigan Rentals:

Hennigan is owed $175 from its customers on December 31.

Explanation:

Accounts Receivable

Date       Description           Debit     Credit   Balance

Dec. 8    Cash                                     $75     ($75)

Dec. 20  Earned Rentals    $750                  $675

Dec. 31   Cash                                 $500      $175

When a rental company accepts payment in advance of its service, it increases the cash balance and reduces the Accounts Receivable.  In the same way, when cash is received for services already rendered and invoiced, the cash balance is increased and the Accounts Receivable reduced by the same amount.

Accounts Receivable represents the total amount owed to a company resulting from the provision of goods and services on credit.  The balance forms part of the current assets in the company's balance sheet.

A journal entry for a sale on account debits account receivable and credits revenue account.  When the customer pays on account, cash is debited while the accounts receivable is credited.  At the end of the period, the account is balanced.