Question

(1) On January 10, Molly Amise uses her Blue Spruce Corp. credit card to purchase merchandise from Blue Spruce Corp. for $2,000. On February 10, Molly is billed for the amount due of $2,000.

(2) On February 12, Molly pays $1,200 on the balance due.
(3) On March 10, Molly is billed for the amount due, including interest at 2% per month on the unpaid balance as of February 12

Prepare the entries on Blue Spruce Corp.'s books related to the transactions that occurred on January 10, February 12, and March 10. (Omit cost of goods sold entries.)

Answer 1

Jan 10

dr. Accounts Receivable 2,600

cr. Sales Revenue 2,600

Feb 12

dr. Cash 1,600

cr. Accounts Receivable 1,600

Mar. 10

dr. Accounts Receivable 8.67 ($1,000 x 12% p.a. x 26/360)

cr. Interest Revenue 8.67

using a 360-day year

Answer 2

Step-by-step explanation:

The journal entries are shown below:

(A) Accounts receivable A/c Dr $2,000

To Sales revenue A/c $2,000

(Being the merchandise is sold on credit)

(B) Cash A/c Dr $1,200

To Accounts receivable A/c $1,200

(Being cash is received in respect of goods sold)

(C) Accounts receivable A/c Dr $16

To Interest revenue A/c $16

(Being interest is recorded)

The computation of interest is shown below:

= (Sales revenue - cash) × interest rate

= ($2,000 - $1,200) × 2%

= $800 × 2%

= $16