Foghorn Company entered into a sales transaction in which it agreed to receive common stock from Leghorn Corporation as payment for services provided to Leghorn Corporation. The journal entry to record the receipt of payment for the sales transaction will include a

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Business

Skyler Jennings

13 February, 02:38

Foghorn Company entered into a sales transaction in which it agreed to receive common stock from Leghorn Corporation as payment for services provided to Leghorn Corporation. The journal entry to record the receipt of payment for the sales transaction will include a

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Aleena Dudley · Answer 1

The journal entry should be:

Dr Investment in Leghorn Corporation XX

Cr Accounts receivable XX

Explanation:

Foghorn Company must record the noncash payment as an asset which should be equal to the amount of money that it generally would have collected from the services provided. Since the payment is done through stocks, it must record that collection as an investing account.

Since transferring stocks usually takes a couple of days at least, the original journal entry should have recorded a debit to accounts receivable and a credit to service revenue.