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In: Accounting

Class, Zoo-doo Compost, Inc. processes fertilizer made with organic materials provided by the animals at Big...

Class, Zoo-doo Compost, Inc. processes fertilizer made with organic materials provided by the animals at Big City Zoo. Zodo is sold in specially designed plastic pails that may be kept and used for household chores or returned to the seller. The fertilizer is sold for $12.50 per two-gallon pail (including $1.76 cost of the pail). For each pail returned, Zodo donates $1 to Big City Zoo and the pail is used again.

What is your opinion on how to account for the donations to be made when fertilizer pails are returned? Ignore tax implications.

Solutions

Expert Solution

Accounting Entry

Dr Cr
Expense Account-Donation A/C Dr $ 1
To Cash A/C $ 1
( Being donation given accounted )

Reason why expense account debited is that, for Nominal Account all expense are debited.

Reason why cash account credited is that, asset is going out so credited.

ekkarill92 answered 2 years ago
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