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During its accounting year end to 29 February 20X5, Neptune Co agreed with Sun Co, who it both purchased goods from, and sold goods to, on credit terms, to contra an amount that left the a balance outstanding from Sun Co due to Neptune Co of $750. At the date of this this agreement, Neptune Co had a receivables ledger account balance for Sun Co of $2,685 and a payable ledger account balance of $2,565.
What accounting entries should Neptune Co make in its general ledger to record this situation?
A – dr. Trade payables $1,935
cr. Trade receivables $1,935B – dr.Trade receivables $1,815
cr. Trade payables $1,815C – dr. Trade receivables $1,935
cr. Trade payables $1,935D – dr. Trade payables $1,815
cr. Trade receivables $1,815As I read the question, at the end of the contra Sun owes Neptune 750 or, to out it another way, Neptune is expecting 750 from Sun. This means that Neptune’s account with Sun in Neptune’s Receivables Ledger shows 750Dr.
The account started at 2685 Dr so will reduce by 1935 to reach 750. A credit of 1935 needs to be made in trade receivables and a debit of 1935 will be made in the payables account to complete the contra.
Therefore, answer A looks right.
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