Question

On January 10, Andrew Farley uses his Paltrow Co. credit card to purchase merchandise from Paltrow Co. for $17,500. On February 10, Farley is billed for the amount due of $17,500. On February 12, Farley pays $8,750 on the balance due. On March 10, Farley is billed for the amount due, including interest at 4% per month on the unpaid balance as of February 12. Prepare the entries on Paltrow Co.’s books related to the transactions that occurred on January 10, February 12, and March 10.

Answer 1

Answer and Explanation:

As per the data given in the question,

Entries on Paltrow Co.'s books :

Jan-10 Accounts receivable A/c Dr. $17,500

To Sales revenue A/c. $17,500

(Being sales on account is recorded)

Feb-12 Cash A/c Dr. $8,750

To Accounts receivable A/c. $8,750

(Being cash receipt on credit sales is recorded)

Mar-10 Accounts receivable A/c Dr. $350

To interest revenue A/c. $350

($17,500 - $8,750 = $8,750 × 4% = 350)

( Being due amount with interest is recorded)