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NEW YEARS EVE SALE!!! 24-MONTH ZERO % FINANCING!!! ONE DAY ONLY!!! It is December 31,...

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Accounting

NEW YEARS EVE SALE!!! 24-MONTH ZERO % FINANCING!!! ONE DAY ONLY!!!

It is December 31, 2020 and Boyer Chevrolet offers a customer a 2020 Malibu for $29,000 but with 2-years to pay. The customer is asked to sign the promissory note depicted below.

The accountant at Boyer proposes the following accounting for the deal.

Date

Account Titles

Debit

Credit

2020

Dec 31

Notes receivable

29,000

Sales

29,000

The accountant smiled as he overlooked the busy showroom and was overheard making the following comment: with this sale, we should be able to hit our profit targets for the 4thquarter and get our bonuses.

A Malibu of this type normally sells for a cash price of $25,000. Do you agree with the above accounting? If not, provide an alternative accounting for the deal.

Date

Account Titles

Debit

Credit

Answer & Explanation Solved by verified expert
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