Lindley Enterprises sells hand-woven rugs. Paige Corporation is a regular customer of Lindley. On June 30, Paige purchased 500 rugs from Lindley for $400,000 on credit. On August 15, Paige paid Lindley in full on its $400,000 balance. Required: Prepare the related journal entries for Lindley.

Sales on June 30:

Dr accounts receivable $400,000

Cr sales revenue $400,000

On August 15:

Dr cash $400,000

Cr accounts receivable $400,000

Explanation:

On June 30 when Lindley Enterprises sold 500 rugs worth $400,000 to Paige Corporation, Lindley would have to recognize sales of $400,000 since the rugs have been transferred to Paige Corporation by crediting sales revenue and debiting accounts receivable with $400,000.

On August 15, Lindley would have received cash of $400,000 in respect of their earlier sales, hence accounts receivable should be credited while cash account is debited