Woodworking Inc. is a private company. The custom build furniture.

Woodworking Inc. is a private company. The custom build furniture. On June 1, 2021 Jill Wong signs a contract for Woodworking Inc. to build her a custom dining room set. She has to pay 15% on signed of the contract and will pay the balance on deliver on August 1, 2021. The selling price was $10,000 and the cost to build the furniture was $2,800.

Prepare the journal entries for June 1^st and August 1^st.

Expert Solution

In the first entry,the company has signed the contract but has not yet provided the services, so the unearned revenue account is credited as the company's liability has increased. In the next entry, the unearned revenue account has been debited as the liability has decreased and the service has been provided. In the last entry, the entry for the cost of goods sold has been made in order to reflect the actual cost of the furniture.

1. 1. June 1 Cash 1,500

Unearned Revenue 1,500 (10,000*15%)

Aug 1 Cash 8,500

Unearned Revenue 1,500

Service Revenue 10,000

Aug 1 Cost of goods sold 2,800

Inventory 2,800

Ribika answered 2 years ago

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