the cpompany has customers make a 20% deposit on items made. This deposit is cre
ID: 2515160 • Letter: T
Question
the cpompany has customers make a 20% deposit on items made. This deposit is credited to the Unearned Sales Account when received. Customers pay the remaining balance (80% of the selling price) once the product is done and delivered. On june 1,2016, the Unearned Sales account had a credit balance of $180,000. During June and July 2016, total customer deposits made for products to be delivered in the future amounted to $400,000 and S480,000 you!!! Questions: (please explain answers, not just give. thank What account would be debited when customer deposits are received? What account would be credited when the customer deposits are received? During june and july 2016, the company completed and delivered goods worth $800,000 and $1,200,000, for which customer deposits had been received. (Note: $800,000 and $1,200,000 is the total selling price including the 20% deposit) What is the total sales revenue recognized for june and july As of june 31, what is the balance of the Unearned Sales account? As of july 30th, what is the balance of the Unearned Sales account? (The best way to answer 5and6 is to construct a 3 column ledger)Explanation / Answer
Question : What account should be debited when customer deposits are received:
Answer: Since cash is received, and the balance in the cash account increases, cash account should be debited.
Question What account should be credited when customer deposits are received.
Answer: Products are to be delivered in the future. Therefore sales revenue should not be recognized at the time the deposits are received, since the revenues have not been earned. Therefore, unearned sales revenue should be credited. Once the products are delivered, the company can recognize revenue by crediting sales revenue and debiting ( reversing) unearned sales revenue.
Entries for June and July :
Let us look at the ledger account ( T account) of unearned sales revenue:
Total Sales Revenue for June : $ 800,000
Total Sales Revenue for July : $ 1,200,000.
Transaction / Event Month Account Titles Debit Credit $ $ a. June 2016 Cash 400,000 Unearned Sales Revenue 400,000 To record deposits received from customers on account b. June 2016 Unearned Sales Revenue 160,000 Cash 640,000 Sales Revenue 800,000 To record sales revenue c. July 2016 Cash 480,000 Unearned Sales Revenue 480,000 To record deposits received from customers on account d. July 2016 Unearned Sales Revenue 240,000 Cash 960,000 Sales Revenue 1,200,000 To record sales revenueRelated Questions
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