Question

on march 1, 2023, blossom company sold goods to wildhorse inc. for $642,000 in exchange for a five-year, zero-interest-bearing note in the face amount of $1,033,947. the goods have an inventory cost on blossom's books of $405,000. prepare the journal entry for blossom on december 31, 2023.

Answer 1

The journal entry for Blossom Company on December 31, 2023, involves debiting Accounts Receivable and Unearned Revenue, and crediting Revenue and Cost of Goods Sold.

Step-by-step explanation:

The journal entry for Blossom Company on December 31, 2023, would be as follows:

1. Debit: Accounts Receivable - Wildhorse Inc. ($642,000)
2. Debit: Unearned Revenue ($391,947)
3. Credit: Revenue ($1,033,947)
4. Credit: Cost of Goods Sold ($405,000)

The entry debits Accounts Receivable for the amount owed by Wildhorse Inc. and debits Unearned Revenue for the portion of the note that has not yet been recognized as revenue. It credits Revenue for the total face amount of the note and credits Cost of Goods Sold for the cost of the goods sold. This entry recognizes the revenue from the sale and adjusts the accounts accordingly.