Question

On December 18, Intel receives $260,000 from a customer toward a cash sale of $2.6 million for computer chips to be completed on January 23. The computer chips had a total production cost of $1.6 million. What journal entries should Intel record on December 18 and January 23

Answer 1

December 18

Debit : Cash $260,000

Credit : Deferred Revenue $260,000

January 23

Debit : Cost of Sales $1.6 million

Debit : Deferred Revenue $260,000

Debit : Trade Receivable $2,340,000

Credit : Inventory $1.6 million

Credit : Sales Revenue $2.6 million

Step-by-step explanation:

During December 18, the firm receives cash and must recognize this asset. On the other hand it should recognize the Liability, Deferred Revenue for the sale not yet completed.

During January 23, reverse the Deferred Revenue and recognize the Sales Revenue for that amount. Also recognize the cost of sales and decrease in inventory. the remainder not yet paid is a Trade Receivable and must be recognized.