Question

Dress for Success is an upscale dress shop. On 15 August, Sally, a regular customer, came in and put a deposit down on two items: $50 on a dress and $100 on a suit. The deposit was in the amount of $150, which represented 20% of the total retail value of the clothes. On 21 August, Sally came in again to the store and decided to take the dress. She paid the remaining amount of $200 and took the dress home. On 2 September, she came in and paid the full amount remaining for the suit.

Required:

Prepare the journal entries that Dress for Success would use to record these transactions.

Answer 1

 

The following are the journal entries which are required:

15 August:

Dr. Cash                                                             150

            Cr. Contract liability (Unearned revenue)                150

 

21 August

Dr. Contract liability (Unearned revenue)      50

Dr. Cash                                                             200

            Cr. Sales Revenue                                                       250

 

 

2 September

Dr. Contract liability (Unearned revenue)      100

 Dr. Cash                                                              400

            Cr. Sales Revenue                                                       500