Answer to Question #213140 in Accounting for zuby

Question

2.

For each of the following transactions, determine if Raymond Corporation has earned revenue during the month of May and, if so, how much it has earned.

1.

Customers paid Raymond $1,500 for work Raymond will perform in June.

2.

Customers purchased $6,000 of inventory for which they have not yet paid.

3.

Raymond performed work for customers and was paid $3,400 in cash.

4.

Customers paid Raymond $2,300 for inventory purchased in April.

3.

Record the journal entries for number 2 above.

Answer 1

Revenues are earned when such goods or services are transferred or rendered.

1. There is no revenue earned since the service has not been rendered. The journal entry will be;

Dr Bank $1,500

Cr Prepaid Sales $1,500

2 Revenue earned is $6,000 since the goods have already been transferred.

Dr Debtors $6,000

Cr Credit Sales $6,000

3 Revenue earned is $3,400 since the service has already been rendered. The revenue is also realized since it has been paid.

Dr Cash $3,400

Cr Sales $3,400

4 The revenue was earned in April not May $2,300 during the sale.

Dr Cash $2,300

Cr Debtors $2,300