Question

On May 10, 2020, Crane 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 $1,840 on July 15, 2020. The cost of the goods is $1,170. Crane delivers the product to Greig on June 15, 2020, and receives payment on July 15, 2020. Prepare the journal entries for Crane 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:

1. Accounts receivable a/c Dr $1,840

To Sales revenue a/c Cr $1,840

(Being the sales is recorded)

2. Cost of goods sold a/c Dr $1,170

To Inventory a/c Cr $1,170

(Being the cost of goods sold is recorded)

3. Cash a/c Dr $1,840

To Accounts receivable a/c Cr $1,840

(Being the payment received is recorded)

Only these three entries are recorded