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Chapter 18: 19BE (page 1033)

On May 1, 2017, Mount Company enters into a contract to transfer a product to Eric Company on September 30, 2017. It is agreed that Eric will pay the full price of $25,000 in advance on June 15, 2017. Eric pays on June 15, 2017, and Mount delivers the product on September 30, 2017. Prepare the journal entries required for Mount in 2017.

Short Answer

Expert verified

Revenue = $25,000

Step by step solution

01

Meaning of Unearned Sales

A sum received by a corporation for a product or service that it has yet to give to a client is known as unearned sales. When a corporation takes upfront or payments made in advancebefore delivering any goods or services to customers, it is referred to as unearned income ordeferred revenue.

02

Journal entries required for Mount

Date

Particular

Debit ($)

Credit ($)

May 1, 2017

No entry

June 15, 2017

Cash a/c

25,000

Unearned sales revenue a/c

25,000

September 30, 2017

Unearned sales revenue a/c

25,000

Sales revenue a/c

25,000

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Instructions

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