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JTF, Inc. recently entered into a contract to produce and ship 1,000 units to a client...

JTF, Inc. recently entered into a contract to produce and ship 1,000 units to a client for $10,000. After careful consideration, JTF's accounting department has determined that the company has two specific obligations: the production and the shipment. Since they believe that $8,000 of the transaction price should be allocated to production and the remaining $2,000 to shipping. What should the journal entry include if the customer pays $9,000 on the day JTF finishes production of the units?

A) Debit to cash of $10,000

B) Debit to A/R of $1,000

C) Credit to sales revenue of $9,000

D) Credit to contract liability of $1,000

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Answer #1
Journal entry of the transaction is passed as below,
Journal Entries
Date Account Title and explanation Debit Credit
Cash $                           9,000
----------- Account receivable $                           1,000
      To Sales Revenue $                      10,000
So, As per the above,
Answer = Option B = Debit To A/R of $ 1000
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