Question

The Mojito Computer Store had the following transactions in May 2018.

Required (5 points):

For each transaction, indicate in the space provided how much, if any, revenue or

expense should be recorded in May 2018.

a. Sold a computer to a customer in the amount of $2,100. Delivered the

computer in May. Customer paid in June 2018.

Amount of revenue to be recorded in May______________

b. Collected $1,200 in May from a customer for a computer to be delivered in

June.

Amount of revenue to be recorded in May ______________

c. Paid $400 in sales commissions to sales persons related to sales that were

made in April 2018.

Amount of expense to be recorded in May ______________

d. Paid $2,400 in May for a 6-month insurance policy to cover the period from

May 1, 2018 - October 31, 2018.

Amount of expense to be recorded in May ______________

e. Received an electric bill for May in the amount of $230. The bill is not due

for payment until June 15.

Amount of expense to be recorded in May ______________

Answer 1

a. Sold a computer to a customer in the amount of $2,100. Delivered the

computer in May. Customer paid in June 2018.

Amount of revenue to be recorded in May=$2100

Revenue is recognized as soon as goods are transferred to customer, Collection of sales is not a trigger point for recoding revenue.

b. Collected $1,200 in May from a customer for a computer to be delivered in

June.

Amount of revenue to be recorded in May =$0.00

$1200 is an unearned sales revenue for may, so no revenue will be recognized. The amount of revenue will be recognized in June when goods are transferred.

c. Paid $400 in sales commissions to sales persons related to sales that were

made in April 2018.

Amount of expense to be recorded in May $0.00

Expense relates to the month of April and should be recognized in April only.

d. Paid $2,400 in May for a 6-month insurance policy to cover the period from

May 1, 2018 - October 31, 2018.

Amount of expense to be recorded in May = $400

One month’s Insurance expense will be recoded calculated as below

$2400/6x1=$400

e. Received an electric bill for May in the amount of $230. The bill is not due

for payment until June 15.

Amount of expense to be recorded in May =$230

The bill may not be due until june 15 but the expense relates to may and hence will be recorded in the month of may by debiting Utility expense and crediting utility payable.