On 1/1/20 Toyota sells a car for a non-interest bearing note. The car would normally sell...

On 1/1/20 Toyota sells a car for a non-interest bearing note. The car would normally sell for $75,000 in cash, but the customer instead opts to pay a lump sum of $100,000 in two years (this is the only payment). The car costs Toyota $55,000 to build. Assume that Toyota uses a perpetual inventory system and sells directly to the customer.

1. Record the two journal entries that Toyota should record for the sale (the second journal entry being for Cost of Goods Sold and Inventory). Also what is the gross profit generated on the date of sale

Solutions

Expert Solution

The following journal entry will be prepared to record the sale:

Date	Account Titles and Explanation	Debit	Credit
01-01-2020	Notes Receivable	100000
	Sales Revenue		75000
	Discount on Notes Receivable (100,000 - $75,000)		25000

The following journal entry will be prepared to record the cost of goods sold:

Date	Account Titles and Explanation	Debit	Credit
01-01-2020	Cost of Goods Sold	55000
	Inventory		55000

ekkarill92 answered 1 year ago

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