Furtastic manufactures imitation fur garments. On June 1, 2018, Furtastic made a

Question

Furtastic manufactures imitation fur garments. On June 1, 2018, Furtastic made a sale to Willett’s Department Store under terms that require Willett to pay $240,000 to Furtastic on June 30, 2018. In a separate transaction on June 15, 2018, Furtastic purchased brand advertising services from Willett for $30,000. The fair value of those advertising services is $14,000. Furtastic expects that 4% of all sales will prove uncollectible.

Required:
1. to 3. Prepare the journal entries to record the transactions above. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

1 to 3) Journal Entries to record the above transactions are shown as follows:- (Amt in $)

Working Notes:-

i) As the advertising services has a fair value of $14,000 that is less than the amount paid by Furtastic to Willett ($30,000), the remaining amount of $16,000 ($30,000 - $14,000) will be viewed as a refund, reducing sales revenue by that amount.   

Date General Journal Debit Credit June 1, 2018 Accounts Receivable 240,000 Sales Revenue 240,000 (To record the credit sales) June 15, 2018 Advertising expense 14,000 Sales Revenue (30,000 - 14,000) 16,000 Cash 30,000 (To record the advertising expense) June 30, 2018 Cash 240,000 Accounts Receivable 240,000 (To record the cash received from accounts receivable)

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