Question

Case1

1)Express design Ltd provide $5000 of graphic design service to one of its clents with credit terms of net 30 days on 3 June 2018. Revenue are considered earned when the service are provided. This mean that on June 3 express design will recognize the revenues even if it will not receive money until 3^rd of the july

Required

identify which account are affected and explain how they are affected

Prepare journal entry for the transaction on 3 June 2018

2) Express Design also sells design product. It has just sold and shipped $11000 worth of design product using the terms FOB., shipping point on 10 June 2018. The cost of good sold for this sale is 80% of the sales amount

Required

calculate the cost of good sold

Prepare journal entry for the transaction on 10 June 2018

3 Express Design also sells design product. It has just sold and shipped $11000 worth of design product using the terms FOB., shipping point on 10 June 2018. The cost of good sold for this sale is 80% of the sales amount. The term of the sale is 2/10 net 30

Required

explain the credit terms 2/10, net 30

what is net amount due on 15 June 2018

what the net amount due on 15 July 2018

Answer 1

Solution 1:

The affected accounts are accounts receivables and service revenue. Accounts receivables will be debited as amount is recoverable from customer for service rendered and service revenue will be credit to recognize revenue earned.

Journal Entries
Date	Particulars	Debit	Credit
3-Jun-18	Accounts receivables Dr	$5,000.00
	To Service Revenue		$5,000.00
	(To record service revenue on account)

Solution 2:

Cost of goods sold = $11,000 * 80% = $8,800

Journal Entries
Date	Particulars	Debit	Credit
10-Jun-18	Accounts receivables Dr	$11,000.00
	To Sales revenue		$11,000.00
	(To record sales revenue)
10-Jun-18	Cost of goods sold Dr	$8,800.00
	To Inventories		$8,800.00
	(To record COGS)

Solution 3:

Credit terms 2/10, net 30 means, if amount is paid with in 10 days of sales, then 2% discount will be given,otherwise payment should be made upto 30 days without any discount.

Net amount dude on 15.06.2018 = $11,000 * 98% = $10,780

Net amount due on 15.07.2018 = $11,000