Question

Discount Bubbly Sodapro sells flavored water products and offers a promotion allowing current customers to receive $10 off their next purchase of a case of water valued at $300. On 1/1/XI, a convenience store places an order for two cases of water and requests that the promotion be applied. Sodapro delivers the product on 1/3/X1.

Research and document the appropriate accounting by Sodapro for this transaction, providing the necessary journal entries.

Journal Entries:

On 1/1/XI, when the convenience store places the order:

Journal Entry:
Debit: _________________ (Accounts Receivable or Cash - depending on the payment terms)
Credit: _________________ (Sales Revenue)

Answer 1

Sodapro must record the transaction on 1/1/X1 when the order is placed by the customer with an entry debiting Accounts Receivable and crediting Sales Revenue for the net amount after discount. The total recognized on the journal entry will be $580, reflecting the $10 promotion applied to the $600 total value of two cases.

Step-by-step explanation:

The appropriate accounting for Sodapro's transaction involving a promotional discount to a customer on the sale of water cases can be documented through the following journal entries:

On 1/3/X1, when Sodapro delivers the product:
(No additional journal entry is needed if the delivery is within the same accounting period and payment term as recognized on 1/1/X1)

These entries reflect the customer's intention to use the promotional discount, and the recognition of revenue by Sodapro for the sale of the two cases. The discount is subtracted from the total value of the sale because the customer will pay the reduced amount.