Summary Journal Entry for Best Lawn Care Inc.
What is the journal entry for cash sales of the maintenance plans offered by Best Lawn Care Inc.?
How should the revenue from the sales of the one-year and three-year maintenance plans be recorded in the journal?
Journal Entry for Cash Sales
For the cash sale of 200 one-time plans for the current year at $200 each:
Debit Cash: $40,000
Credit Service Revenue: $40,000
For the cash sale of 100 discounted one-time plans for the following year at $190 each (after a 5% discount):
Debit Cash: $19,000
Credit Service Revenue: $19,000
For the cash sale of 300 three-year maintenance plans at $500 each:
Debit Cash: $150,000
Credit Service Revenue: $150,000
Best Lawn Care Inc. (BLC) offers customers two lawn maintenance services - a one-year maintenance plan at $200 and a three-year maintenance plan at $500. Customers can receive a 5% discount for early payment on the one-year plan.
The journal entries for the cash sales of these plans involve debiting Cash and crediting Service Revenue. For the one-time plans sold for the current year and the discounted plans for the following year, the amounts are recorded accordingly. Similarly, the three-year maintenance plans are recorded in the journal with the corresponding cash received and service revenue recognized.
These journal entries ensure that the company accurately reflects its revenue from the maintenance services provided to customers, maintaining proper financial records for the business.