Question

Prepare the summary entries necessary to determine the amount of cash received from customers for each of the four independent situations below.
  

Situation	Sales revenue			Accounts receivable Increase (Decrease)			Cash received from customers
1	$	280,000		$	10,800		?
2		280,000			(10,800		?
3		140,000			(15,800		?
4		140,000			15,800		?

Prepare the summary entries necessary to determine the amount of cash received from customers for each of the four independent situations below.

1. CASH RECEIVED

Situation	Sales revenue			Accounts receivable Increase (Decrease)			Cash received from customers
1	$	280,000		$	10,800		?
2		280,000			(10,800)		?
3		140,000			(15,800)		?
4		140,000			15,800		?

PREPARE A GENERAL JOURNAL

1 Record the entry for situation 1.

2.Record the entry for situation 2.

3. Record the entry for situation 3

4 Record the entry for situation 4

Answer 1

Solution: Information Given: Situation Sales Revenue $280,000 $280,000 $140,000 $140,000 Accounts Receivable | Cash Received Increase /(Decrease) from Debtors $ 10,800 (10,800) (15,800) 15,800 Calculation of Cash Received from Debtors: 1. Situation-1 Cash Received from Debtors = Sales Revenue-Increase in Accounts Receivable = $280,000 - $10,800 = $269,200 Cash received from Debtors = $269,200 (Note: As we know that the relationship between cash and Current asset is adverse. It means that if there is any increase in accounts receivable than cash will be decreased. So we will deduct Increase in Accounts Receivable from the sales revenue so that we can find Cash Received from debtors. Alternatively we can do it by this way: Let us assume that opening Debtors are nil and Closing debtors are $10,800. It means there is a increase in Account Receivable, now sales revenue is $280,000. Now we will prepare Accounts Receivable account

Accounts Receivable Account Opening Balance Nil Cash Sales 280,000 Closing Balance 280,000 269,200 10,800 280,000 Thus we can say that if there is any Decrease in Accounts Receivable than Cash Received From Debtors can be calculated like this: Cash Received from Debtors = Sales Revenue + Decrease in Accounts Receivable) 2. Situation-2 Cash Received from Debtors = Sales Revenue + Decrease in Accounts Receivable = $280,000 + $10,800 = $290,800 Cash received from Debtors = $290,800 3. Situation-3 Cash Received from Debtors = Sales Revenue + Decrease in Accounts Receivable = $140,000 + $15,800 = $155,800 Cash received from Debtors = $155,800 Situation-4 Cash Received from Debtors = Sales Revenue - Increase in Accounts Receivable = $140,000 - $15,800 = $124,200 Cash received from Debtors = $124,200

Journal Entry: Situation-1 $269,200 Cash Accounts Receivable (To record cash received from Debtors) $269,200 Situation-2 290,800 Cash Accounts Receivable (To record cash received from Debtors) 290,800 Situation-3 155,800 Cash Accounts Receivable (To record cash received from Debtors) 155,800 Situation-4 124,200 Cash Accounts Receivable (To record cash received from Debtors) 124,200 Situation Sales Revenue $280,000 $280,000 $140,000 $140,000 Accounts Receivable Increase /(Decrease) $ 10,800 (10,800) (15,800) 15,800 Cash Received from Debtors $269,200 $290,800 $155,800 $124,200