Question

the cpompany has customers make a 20% deposit on items made. This deposit is credited to the Unearned Sales Account when received. Customers pay the remaining balance (80% of the selling price) once the product is done and delivered. On june 1, 2016, the Unearned Sales account had a credit balance of $180,000. During June and July 2016, total customer deposits made for products to be delivered in the future amounted to $400,000 and $480,000.

Questions: (please explain answers, not just give. thank you!!!)

What account would be debited when customer deposits are received?

What account would be credited when the customer deposits are received?

During june and july 2016, the company completed and delivered goods worth $800,000 and $1,200,000, for which customer deposits had been received. (Note: $800,000 and $1,200,000 is the total selling price including the 20% deposit) What is the total sales revenue recognized for june and july As of june 31, what is the balance of the Unearned Sales account?

As of july 30th, what is the balance of the Unearned Sales account? ( The best way to answer 5and6 is to construct a 3 column ledger )

Answer 1

Ans. On 1st June 2016, Unearned sales account had a credit balance of $180000. During June and July 2016, total customer deposits are $400000 and $480000.
Entry must be :

Cash/ Bank A/c Dr
   To Unearned Sales A/c.

When customer deposits are received then, Cash/Bank Account should be debited as there is inflow of money and Unearned sales Account should be credited because this is a liability and it can't be taken as sales until full and final delivery of product completed.

During June and July 2016, company completed and delivered goods worth $800000 and $1200000 inclusive of 20% customer deposits.
Total sales revenue recognised for the month of June and july is $800000 and $1200000 totalling to $2000000.
Balance of Unearned sales account as on june 30 is $180000 + $400000 - 20% of $800000 =
$180000 + $400000 - $160000 = $420000.
As on July 31 is : $ 420000 + $480000 - 20% of $1200000 = $420000 + $480000 - $240000 = $660000.