Question

Prepare journal entries:

a: provide web design services for $40,000
b. provide web design services for acme, for 20000 on account
c. collect 18,000 on account
d. sell a 1,000 gift certificate
e. redeem 1000 gift certificate for web design services

Answer 1

Journal entries for collecting $18,000 on account and redeeming a $1,000 gift certificate should debit Accounts Receivable and Unearned Revenue, respectively, and credit Cash and Revenue. This accurate record-keeping ensures the business's financial state is clear for each transaction.

Step-by-step explanation:

When preparing journal entries for a business, each transaction must be recorded to keep an accurate record of financial events. In this case, the student inquired about two specific transactions:

1. Collection of $18,000 on account.
2. Redemption of a $1,000 gift certificate for web design services.

For the collection on account, the journal entry would be:

• Debit: Accounts Receivable $18,000
• Credit: Cash $18,000

This entry reflects the receipt of cash, thereby decreasing the accounts receivable.

For the redemption of a gift certificate, the journal entry would be:

• Debit: Unearned Revenue $1,000
• Credit: Revenue $1,000

This entry recognizes the revenue from the gift certificate that was previously recorded as a liability when the gift certificate was sold or issued. The transaction moves the amount from a liability to earned revenue as the service has now been provided.