Accounts-journal entries

pready · Jul 23, 2011, 06:35 AM

First you need to calculate how much commision is due and how much interest is due.

Now you have to figure out what accounts to use. Hint: Both of your journal entries will include an expense account and a payable account.

sherrykalra · Jul 23, 2011, 10:58 PM

Quote:

Originally Posted by pready

First you need to calculate how much commision is due and how much interest is due.

Now you have to figure out what accounts to use. Hint: Both of your journal entries will include an expense account and a payable account.

Cn you xplain it by sloving this...? That will b more helpful 2 me

pready · Jul 24, 2011, 08:03 AM

1. Profit of $106,000 * 6% = $6,360 Commission Payable.
Debit Commission Expense (or other appropriate expense account) for 6,360
Credit Commission Payable for 6,360

2. Interest = Principal * Rate (annual rate) * Time (in years or months/12 months for partial year). Therefore your loan of $150,000 * 9% rate * 9/12 time = $10,125 Interest Payable
Debit Interest Expense of 10,125
Credit Interest Payable of 10,125

Just Looking · Jul 24, 2011, 09:25 AM

I would do #1 differently to compute the amount of the commission. First, I was wondering if you meant $106,000 or if we are talking a different currency than dollars. The question states "6% on net profit after charging such commision", so you need a basic algebra equation to solve. Assuming we are talking dollars, we solve for commissions as follows:

X = .06 * (106,000-x)

X=6360-.06x
1.06x=6360
X=6360/1.06=6,000

You can check this by saying your sales were $106,000, your commission was $6,000, and your net sales are therefore $100,000. As the problem states, the commission is 6% of net sales, and 6% of $100,000 is $6,000.

Accounts-journal entries

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