Question

On November 1, 2018, Cullumber Farm entered into a contract to buy a $162000 harvester from John Deere. The contract required Cullumber Farm to pay $162000 in advance on November 1, 2018. The harvester (cost of $122000) was delivered on November 30, 2018. The journal entry to record the contract on November 1, 2018 includes a credit to Unearned Sales Revenue for $162000. debit to Unearned Sales Revenue for $162000. credit to Sales Revenue for $162000. credit to Accounts Receivable for $162000.

Answer 1

Answer:

The journal entry to record the contract on November 1, 2018 includes: credit to Accounts Receivable for $162000

Explanation:

Following the Accrual accounting - an accounting method that revenue or expenses are recorded when a transaction occurs rather than when payment is received or made. On November 1, 2018, Cullumber Farm had to pay $162,000 in advance to John Deere. John Deere recorded the cash receiving by the entry:

Debit Cash $162,000

Credit Accounts Receivable $162,000

The company did not record revenue because they did not sell the harvester. This was only the advance payment.