Question

On May 10, 2020, Nash Co. enters into a contract to deliver a product to Greig Inc. on June 15, 2020. Greig agrees to pay the full contract price of $2,150 on July 15, 2020. The cost of the goods is $1,470. Nash delivers the product to Greig on June 15, 2020, and receives payment on July 15, 2020. Prepare the journal entries for Nash related to this contract. Either party may terminate the contract without compensation until one of the parties performs

Answer 1

Answer and Explanation:

The journal entries are shown below:

On June 15

Account receivable Dr $2,150

To sales revenue $2,150

(Being product sold on credit is recorded)

Here account receivable is debited as it increased the assets and credited the sales revenue as it also increased the revenue

On June 15

Cost of goods sold Dr $1,470

To Inventory $1,470

(Being the cost of the inventory is recorded)

Here cost of goods sold is debited as it increased the expense and credited the inventory as it decreased the assets

On July 15

Cash Dr $2,150

To Account receivable $2,150

(Being cash receipt is recorded)

Here cash is debited as it increased the assets and credited the account receivable as it decrease the assets