How to Prepare Pharoah Corporation's Journal Entry When Cash is Received?

What is the journal entry needed for Pharoah Corporation when cash is received from Gooch Company?

To prepare Pharoah Corporation's journal entry when cash is received from Gooch Company, we need to record the revenue earned and the commission received. Here's the step-by-step explanation:

Step-by-Step Explanation:

1. Record the cash received from Gooch Company:
  • Debit: Cash - $21,200
  • Credit: Accounts Receivable - $21,200
2. Record the revenue earned from the sale of merchandise:
  • Debit: Accounts Receivable - $21,200
  • Credit: Sales Revenue - $21,200
3. Calculate and record the commission retained by Gooch Company:
  • Debit: Sales Commission Expense - $1,908 (9% of $21,200)
  • Credit: Sales Commission Payable - $1,908
4. Calculate and record the reimbursement for local advertising:
  • Debit: Local Advertising Expense - $540
  • Credit: Accounts Payable - $540
The journal entry for Pharoah Corporation when cash is received from Gooch Company includes debiting Cash, Accounts Receivable, Sales Commission Expense, and Local Advertising Expense, and crediting Accounts Receivable, Sales Revenue, Sales Commission Payable, and Accounts Payable. This entry properly records the cash received, revenue earned, commission retained, and reimbursement for local advertising. By following these steps, Pharoah Corporation can accurately record the transaction in its financial records.
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