
Concept explainers
Prepare the journal entries to record the LP transactions.

Explanation of Solution
Prepare the journal entries to record the sales for an account.
Date | Account Title and Explanation |
Debit ($) |
Credit ($) |
May 15 | 1,200 | ||
Sales Revenue | 1,200 | ||
(To record the sales on account) |
Table (1)
- Accounts receivable is a current asset, and it is increased. Therefore, debit accounts receivable account for $1,200.
- Sales revenue is a component of
stockholders’ equity , and it is increased. Therefore, credit sales revenue account for $1,200.
Prepare the
Date | Account Title and Explanation |
Debit ($) |
Credit ($) |
May 15 | Cost of Goods Sold | 800 | |
Merchandised Inventory | 800 | ||
(To record the cost of goods sold) |
Table (2)
- Cost of goods sold is a component of stockholders’ equity and it is decreased. Therefore, debit cost of goods sold account for $800.
- Merchandise inventory is a current asset, and it is decreased. Therefore, credit merchandise inventory account for $800.
Prepare the journal entry to record sales on account.
Date | Account Title and Explanation |
Debit ($) |
Credit ($) |
May 16 | Accounts Receivable | 20,000 | |
Sales Revenue | 20,000 | ||
(To record the sales on account) |
Table (3)
- Accounts receivable is a current asset, and it is increased. Therefore, debit accounts receivable account for $20,000.
- Sales revenue is a component of stockholders’ equity, and it is increased. Therefore, credit sales revenue account for $20,000.
Prepare the journal entry to record cost of goods sold.
Date | Account Title and Explanation |
Debit ($) |
Credit ($) |
May 16 | Cost of Goods Sold | 13,000 | |
Merchandised Inventory | 13,000 | ||
(To record the cost of goods sold) |
Table (4)
- Cost of goods sold is a component of stockholders’ equity, and it is decreased. Therefore, debit cost of goods sold account for $13,000.
- Merchandise inventory is a current asset, and it is decreased. Therefore, credit merchandise inventory account for $13,000.
Prepare the journal entry to record credit card sale (subsequent collection)) of $2,400 of processor fee of 2%.
Date | Account Title and Explanation |
Debit ($) | Credit ($) |
May 18 | Accounts receivable - UM | 2,352 | |
Credit card expense | 48 | ||
Sales Revenue | 2,400 | ||
(To record the credit card sales.) |
Table (5)
Calculate the processor fee.
Calculate accounts receivable.
- Accounts receivable is a current asset, and it is increased. Therefore, debit accounts receivable account for $2,352.
- Credit card expense is a component of stockholders’ equity, and it is decreased. Therefore, debit credit card expense account for $48.
- Sales revenue is a component of stockholders’ equity, and it is increased. Therefore, credit sales revenue account for $2,400.
Prepare the journal entry to record cost of goods sold.
Date | Account Title and Explanation |
Debit ($) |
Credit ($) |
May 18 | Cost of Goods Sold | 1,400 | |
Merchandised Inventory | 1,400 | ||
(To record the cost of goods sold) |
Table (6)
- Cost of goods sold is a component of stockholders’ equity and it is decreased. Therefore, debit cost of goods sold account for $1,400.
- Merchandise inventory is a current asset, and it is decreased. Therefore, credit merchandise inventory account for $1,400.
Prepare the journal entry to record credit card sale (immediate credit) of $10,000 of processor fee of 2%.
Date | Account Title and Explanation |
Debit ($) | Credit ($) |
May 19 | Cash | 9,800 | |
Credit card expense | 200 | ||
Sales Revenue | 10,000 | ||
(To record the credit card sale.) |
Table (7)
Working notes:
Calculate processor fee.
Calculate accounts receivable.
- Cash is a current asset, and it is increased. Therefore, debit cash account for $9,800.
- Credit card expense is a component of stockholders’ equity, and it is decreased. Therefore, debit credit card expense account for $200.
- Sales revenue is a component of stockholders’ equity, and it is increased. Therefore, credit sales revenue account for $10,000.
Prepare the journal entry to record cost of goods sold for $6,000.
Date | Account Title and Explanation |
Debit ($) |
Credit ($) |
June 5 | Cost of Goods Sold | 6,000 | |
Merchandised Inventory | 6,000 | ||
(To record the cost of goods sold) |
Table (8)
- Cost of goods sold is a component of stockholders’ equity and it is decreased. Therefore, debit cost of goods sold account for $6,000.
- Merchandise inventory is a current asset, and it is decreased. Therefore, credit merchandise inventory account for $6,000.
Prepare the journal entry to record for received cash payment from L.
Date | Account Title and Explanation |
Debit ($) |
Credit ($) |
June 6 | Cash | 19,600 | |
Sales Discount | 400 | ||
Accounts Receivable | 20,000 | ||
(To record the receipt of cash from L) |
Table (9)
Working notes:
Calculate sales discount.
Calculate cash received.
- Cash is a current asset, and it is increased. Therefore, debit cash account for $19,600.
- Sales discount is a component of stockholders’ equity, and it is decreased. Therefore, debit sales discount for $400.
- Accounts receivable is a current asset, and it is decreased. Therefore, credit accounts receivable account for $20,000.
Prepare the journal entry to record for received cash payment from UM.
Date | Account Title and Explanation |
Debit ($) | Credit ($) |
June 7 | Cash | 2,352 | |
Accounts receivable - UM | 2,352 | ||
(To record the collection from credit card company.) |
Table (10)
- Cash is a current asset, and it is increased. Therefore, debit cash account for $2,352.
- Accounts receivable is a current asset, and it is decreased. Therefore, credit accounts receivable account for $2,352.
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