Question

giorgio italian market bought $11,200 worth of merchandise from food suppliers and signed a 90-day, 7% promissory note for the $11,200. food supplier's journal entry to record the sales transaction is:

Answer 1

The food supplier's journal entry to record the sale of $11,200 worth of merchandise would involve debiting Accounts Receivable or Notes Receivable and crediting Sales Revenue for $11,200. Interest earned on the note should be recorded separately.

Step-by-step explanation:

Giorgio Italian Market bought $11,200 worth of merchandise from food suppliers and signed a 90-day, 7% promissory note. The food supplier's journal entry to record the sales transaction should reflect the extension of credit and earning of interest receivable over the life of the note. The journal entry would typically involve debiting Accounts Receivable or Notes Receivable and crediting Sales Revenue for the principal amount of $11,200. The interest income, which can be recorded over time or at the maturity of the note, would involve debiting Interest Receivable and crediting Interest Revenue, calculated as the principal amount times the interest rate times the portion of the year the note is outstanding (90 days in a 365-day year for a 7% interest rate).

In accounting, this type of transaction impacts financial capital as the supplier is converting goods (an outflow of products) to a promissory note (an inflow of financial capital). Over the 90-day period, the original $11,200 would accrue interest, adding to the supplier's financial capital through fee-for-service arrangements like interest on the note.

Answer 2

The food supplier's journal entry to record the sales transaction would be: Debit: Accounts Receivable ($11,200), Credit: Sales Revenue ($11,200).

Step-by-step explanation:

The food supplier's journal entry to record the sales transaction would be:

1. Debit: Accounts Receivable ($11,200)
2. Credit: Sales Revenue ($11,200)

This journal entry reflects the fact that the food supplier made a sale to Giorgio Italian Market and is now owed $11,200, which is recorded as an increase to Accounts Receivable. At the same time, the supplier recognizes the revenue from the sale by crediting Sales Revenue.