[FrozenSpark]

A company rented a front-end loader to Landscrapers, Inc at a $250 per day rate. Landscrapers, Inc. will settle their account when they return the loader. They expect to keep it about two or three weeks.


On the day that the company rented the loader, how would you journalize it? The fact that they expect to keep it for two or three weeks is what's confusing me. How can I journalize this if specific amount of time is not stated?

P.S. the journal entry is for the company that is lending the loader, not the company that is renting it (Landscrappers)

[CaptainForest]

You would NOT make any journal entry to record the sale, since no sale/rent has occurred.

To recognize revenue, some of the requirements are that the acts to the sale are complete (which they have not, since its b/w 2 to 3 weeks) and also that collectability is assured. They haven't paid you anything, so you don't record anything yet.

As for what to do.

Indicate a note in your financial statement about this.

Now, let's say next week is your year end.

Obviously you have made 1 weeks of revenue, so at that time (in 1 week), you will record revenue for 1 week.

[FrozenSpark]

You would NOT make any journal entry to record the sale, since no sale/rent has occurred.

To recognize revenue, some of the requirements are that the acts to the sale are complete (which they have not, since its b/w 2 to 3 weeks) and also that collectability is assured. They haven’t paid you anything, so you don’t record anything yet.

As for what to do.

Indicate a note in your financial statement about this.

Now, let’s say next week is your year end.

Obviously you have made 1 weeks of revenue, so at that time (in 1 week), you will record revenue for 1 week.

Ok, how about in the end of the month when adjusting entries have to be made?

[CaptainForest]

At the end of the moth, how long has Landscaping has the equipment for?

Let's say they have had it for one week (seven days), then you record…

Dr. AR 1,750
Cr. Sales 1,750

7 x 250 = 1,750