Question

Kincaid Company provided consulting services of $2,500 to a customer who paid $1,300 and promised to pay the remainder next month. Which of the following journal entries correctly records this transaction?

A Cash 1,300
Accounts Payable 1,200
Consulting Revenue 2,500
B Cash 1,300
Accounts Receivable 1,200
Consulting Revenue 2,500
C Cash 1,300
Consulting Revenue 1,300
D Consulting Revenue 2,500
Cash 1,300
Accounts Receivable 1,200

Answer 1

The correct journal entry to record Kincaid Company's transaction is option B, which includes Cash of $1,300, Accounts Receivable of $1,200, and Consulting Revenue of $2,500. This records both the revenue earned and the promise to pay the outstanding balance.

Step-by-step explanation:

To address the student's question regarding the correct journal entry for Kincaid Company's transaction, it is important to consider both the cash received and the amount promised by the customer to be paid in the future. The company provided services worth $2,500, received $1,300 in cash, and will receive the remaining $1,200 later. The correct journal entry must reflect the cash received, the revenue for services provided, and the amount due from the customer that is now considered an account receivable.

The correct journal entry is:

• Cash 1,300
• Accounts Receivable 1,200
• Consulting Revenue 2,500

This transaction is recorded as option B in the student's provided choices, which demonstrates that the company has both recognized the revenue from services performed and acknowledged the cash received as well as the claim against the customer for the remaining balance.