Question

On October 10, 2017, Executor Co. entered into a contract with Belisle Inc. to transfer Executor’s specialty products (sales value of \(10,000, cost of \)6,500) on December 15, 2017. Belisle agrees to make a payment of $5,000 upon delivery and signs a promissory note to pay the remaining balance on January 15, 2018. What entries does Executor make in 2017 on this contract? Ignore time value of money considerations

Short answer

The total of both debit and credit sides is $16,500.

Step-by-step solution

Definition of Journal Entry

Journal is a book of accounts in which a company records entries of business transactions. It consists of 4 columns. The first column contains the date, the second column contains the account names, the third column contains the debit amount, and the fourth contains thecredit amount.

Journal entry on 15 December 2017

No entry will be recorded on 10 October 2017 as both the parties did not perform the contract.

Revenue will be recognized on 15 December 2017 as the executor delivered the product on 15 December 2017, which means it performed the obligation. Therefore, a journal entry will be:

Date	Particulars	Debit ($)	Credit ($)
October 10, 2017	No Entry
December 15, 2017	Notes Receivable a/c	5,000
	Cash a/c	5,000
	Sales Revenue a/c		10,000
December 15, 2017	Cost of Goods Sold a/c	6,500
	Inventory a/c		6,500