Question

Discount bubbly sodapro sells flavored water products to customers. sodapro offers a promotion whereby current customers can receive $10 off their next purchase of a case of water, valued at $300. a convenience store places an order on 1/1/xi for two cases of water and requests that the promotion be applied to its purchase. sodapro delivers the product on 1/3/x1. research and document the appropriate accounting by sodapro for this transaction, and provide the appropriate journal entries.

Answer 1

The sale made by Discount Bubbly Sodapro to the convenience store with a $10 discount is recorded by debiting Accounts Receivable and crediting Sales Revenue, less the discounts, on the delivery date. Cost of Goods Sold and Inventory adjustments are also needed.

Step-by-step explanation:

The question pertains to the accounting treatment of a sales promotion by Discount Bubbly Sodapro. On 1/1/X1, a convenience store orders two cases of flavored water, each priced at $300, and applies a promotion to receive $10 off on their purchase.

The goods are delivered on 1/3/X1. The appropriate accounting involves recognizing revenue net of the discount at the time the goods are delivered, as this is when the revenue recognition criteria are typically met. Therefore, the journal entry to record the sale on 1/3/X1 would be to debit Accounts Receivable for the net amount receivable and credit Sales Revenue for the gross amount, less the discount. Additionally, the Cost of Goods Sold must be recorded along with a debit to reduce Inventory for the cost associated with the two cases sold.

Journal Entries:

Date: 1/3/X1

• Dr Accounts Receivable $590 ([$300 x 2] - $10)
• Cr Sales Revenue $600 ([$300 x 2] before discount)
• Cr Sales Discounts $10
• Dr Cost of Goods Sold $XX (Cost of two cases)
• Cr Inventory $XX (Cost of two cases)