Question

Happy Travels Agency, Inc. sells tickets for a cruise on DreamCruise Lines to Big Box Company employees. The total cruise package price to Big Box employees is $80,000. Happy Travels Agency receives a commission of 5% of the total price. Happy Travels Agency then remits $76,000 to DreamCruise Lines. Prepare the journal entry that Happy Travels Agency, Inc. will make to record (1) the receipt of $80,000 from Big Box Company employees for the cruise packages and (2) the remittance to DreamCruise Lines and revenue recognized by Happy Travels Agency on this transaction.

Answer 1

When happy Travels Agency will receive $80000 from the Big Bang Company employees, it will create a liability in the name of Dream Cruise Line because the sum of $80000 belongs to Dream Cruise line.Journal entry will be.

At the time of remittance, the happy Travels Agency will pay $76000 to Dream Cruise Line after retaining the commission of $4000 ($80000×5%).Journal entry will be