Question

Bigelow Company sells goods to its customers in December 2009 for $150,000 with payment due in January 2010.  If the company receives $150,000 from its customers in January 2010, then which of the following reflects how Bigelow will record the receipt of the cash?

	a.	Debit cash for $150,000 and credit accounts receivable for $150,000.
	b.	Debit cash for $150,000 and credit sales for $150,000.
	c.	Debit accounts receivable for $150,000 and credit cash for $150,000.
	d.	Debit cash for $150,000 and credit accounts payable for $150,000.

Answer 1

At the time of sale the journal entry was recorded by debiting the account receivable account as the payment was outstanding at that point of time and crediting sales account to record the sale.

Now at the time of receiving the amount journal entry to be recorded will be debiting cash account and crediting the account receivable accounts so as to reduce the amount of account receivable as the amount is received now.

Therefore the correct option is A I.e. Debit cash account by $150,000 and credit account receivable account by $150,000.

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