Question

Henly Company enters into a contract to transfer a product to Propel Inc. On July 31, 2019. It is agreed that Propel will pay the full price of $10,000 in advance on April 15, 2019. Henly delivers the product on July 31, 2019. The cost of the product is $7,500. Requirement: What journal entries are required in 2019?

Answer 1

Answer and Explanation:

The journal entries are shown below:

1. No journal entry should be recorded for entered into a contract

2. On April 15

Cash Dr $10,000

To Unearned sales revenue $10,000

(Being advance is recorded)

3. On July 31

Unearned Sales Revenue $10,000

To Sales Revenue $10,000

(Being the unearned sales revenue is recorded)

Cost of Goods Sold $7,500

Inventory $7,500

(Being the cost of a product is recorded)