Question

Davis sells Weber equipment under an arrangement whereby Davis delivers the equipment on January 1, 2021 and receives payment on June 30, 2022. When subsequent payment occurs, Davis will record a journal entry that includes:A. Debit to discount on notes receivable.
B. Credit to sales revenue.

C. Debit to cash

D. Credit to notes receivable

Answer 1

Answer:

C. Debit to cash

D. Credit to notes receivable

Explanation:

When a company received money for previous sales, the following entry is required -

Debit Cash XXXX

Credit Accounts/Notes receivable XXXX

In that case, as Davis sold Weber equipment with an agreement of notes because of long-term payment, they treated the sale as a note receivable. Whenever the subsequent payment occurred, the entry to record the journal -

Debit to cash and Credit to notes receivable. Therefore, options C and D are both correct.