Black Systems sold and delivered modems to White Computers for $330,000 to be paid by White in three equal installments over the next three months.The journal entry made by Black Systems to record this transaction will include:
A)A debit to Sales Revenue for $330,000.
B)A debit to Accounts Receivable for $330,000.
C)A debit to Accounts Receivable for $110,000.
D)A debit to Cash for $330,000.

Question

Quizplus · Accepted Answer

Black Systems is recording the sale on credit and creating an account receivable for White Computers, since they are not receiving cash immediately. The entry would include a debit to Accounts Receivable for the full amount of $330,000. A debit to Sales Revenue is not correct since the company has not yet earned the full amount, it's only earning $110,000 per month over a 3-month period. A debit to cash is also not correct since payment has not been received yet.

Black Systems Sold and Delivered Modems to White Computers for $330,000