Bolt Electric sold a diesel generator to Windy Marine on January 1. Instead of paying cash immediately, Windy Marine issued a 1 year, non-interest bearing note to Bolt. The face amount of the note is $38,700, and the implicit interest rate is 8% compounded quarterly. The cost of the generator to Bolt Electric is $28,000.
(a) What is the journal entry on Bolt Electric's Books to recognize the sale of the generator?
(b) What is the journal entry on Bolt Electric's books to recognize the effect on inventory, assuming the perpetual system is used?
(c) What is the gross profit on this product?
ANSWER
| Date | Account Titles | Debit | Credit |
| Jan 1 | Note receivables | $35752 | |
| Sales (38700 * 0.924) | $35,752 | ||
| Jan 1 | |||
| Cost of goods sold | $28,000 | ||
| Inventory | $28,000 | ||
c. Gross profit = sale - COGS
= $35752 - 28000 = $7,752
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