Explanation Journal entry : Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically. Prepare the necessary journal entries, assume that the company uses a perpetual system and records the sales discount under the gross method as follows: (a) At the time of sales: Date Account Title & Explanation Debit ($) Credit ($) Accounts receivable 700 Sales Revenue 700 (To record the goods sold on account) Cost of goods sold 500 Inventory 500 (To record cost of goods sold incurred during the year) Table (1) Accounts receivable is an asset and it increases the value of asset. Hence, debit the accounts receivable by $700. Sales revenue is a component of stock holders’ equity and it increases the value of stockholder’s equity. Hence, credit the sales revenue by $700. Cost of goods sold is a component of stockholders’ equity and it decreases the value of stockholder’s equity. Hence, debit cost of goods sold by $500. Inventory is an asset and it decreases the value of assets. Hence, credit inventory by $500. (b) At the time of collection: Date Account Title & Explanation Debit ($) Credit ($) Cash (2) 686 Sales revenue (1) 14 Accounts Receivable 700 (To record the cash received from customer and provide sales discount to the customer) Table (2) Cash is an asset and it increases the value of asset...

6th Edition

ISBN: 9781260823875

Author: PHILLIPS

Publisher: MCGRAW-HILL CUSTOM PUBLISHING

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Chapter 6, Problem 23ME

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Prepare the necessary journal entries, assume that the company uses a perpetual system and records the sales discount under the gross method.

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Chapter 6, Problem 22ME

Chapter 6, Problem 24ME

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Prepare the necessary journal entries, assume that the company uses a perpetual system and records the sales discount under the gross method.

Solution Summary: The author explains that journal entry is a set of economic events which can be measured in monetary terms.

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Prepare the necessary journal entries, assume that the company uses a perpetual system and records the sales discount under the gross method.

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