Question

Bridgeport Company sold $8,780 of its specialty shelving to Elkins Office Supply Co. on account. Bridgeport estimates that an additional $215 in allowances will be granted to Elkins. Prepare the entries when Bridgeport makes the sale.

Answer 1

To record the sale of specialty shelving on account by Bridgeport Company to Elkins Office Supply Co., a debit entry for $8,780 to Accounts Receivable and a credit entry for $8,780 to Sales Revenue are required. Additionally, an estimated sales allowance is accounted for by debiting Sales Allowances and crediting Accounts Receivable by $215.

Step-by-step explanation:

When Bridgeport Company sells $8,780 of specialty shelving to Elkins Office Supply Co. on account and anticipates $215 in allowances, the journal entries required to record the sale are as follows:

• Debit Accounts Receivable for $8,780.
• Credit Sales Revenue for $8,780.

This entry reflects the initial sale made on account (on credit). Additionally, considering the estimation on sales allowances:

• Debit Sales Allowances for $215. This anticipates the reduction in revenue due to expected allowances.
• Credit Accounts Receivable for $215, which adjusts the originally recorded receivable, acknowledging the expectation that not all revenue recorded will be realized due to the allowances.

These entries ensure that the company's financial records accurately reflect the sale and the associated estimated allowances.