Question

A company receives $10,300 cash for performing landscaping services. Which of the following general journal entries will the company make to record this transaction?

1) Debit Cash $10,300, Credit Accounts Receivable $10,300
2) Debit Cash $10,300, Credit Service Revenue $10,300
3) Debit Accounts Receivable $10,300, Credit Cash $10,300
4) Debit Service Revenue $10,300, Credit Cash $10,300

Answer 1

To record the receipt of $10,300 cash for landscaping services, the company will debit Cash and credit Service Revenue, making the correct journal entry the second option. The firm's accounting profit is calculated by subtracting the total of all expenses from the sales revenue, resulting in $50,000.

Step-by-step explanation:

The company will make the following general journal entry to record the transaction of receiving $10,300 cash for performing landscaping services: Debit Cash $10,300, Credit Service Revenue $10,300. This entry reflects the increase in cash, which is an asset account, and the increase in service revenue, which represents the company's earnings from providing services. Therefore, the correct option is 2) Debit Cash $10,300, Credit Service Revenue $10,300.

Regarding the self-check question, the firm's accounting profit can be calculated by subtracting the total expenses from the sales revenue. In this case, the expenses are $600,000 for labor, $150,000 for capital, and $200,000 for materials, which totals to $950,000. Therefore, the accounting profit is $1,000,000 (sales revenue) - $950,000 (total expenses) = $50,000.