What entry will John Deere make when delivering the harvester to Green Valley Farm?

In this scenario, the situation revolves around how revenue recognition works in accounting, particularly when a sale is made and a product is delivered. When John Deere delivers the harvester to Green Valley Farm, it signifies that the sale has been completed, and the revenue can now be recognized.

The most relevant entry when the sale occurs is to recognize the sales revenue. Typically, when a sale is made, you would credit the Sales Revenue account rather than uneared sales revenue. Unearned Sales Revenue refers to the situation where cash is received before the good or service has been delivered, indicating a liability rather than recognized income.

Instead, when a product is delivered, the company would record a debit to Accounts Receivable (or Cash if paid immediately) and a credit to Sales Revenue for the amount of the sale. Additionally, the associated cost of the sold inventory must be recorded, which entails debiting Cost of Goods Sold and crediting Inventory.

Recognizing this context, the correct entry would not involve debiting Unearned Sales Revenue as this account is used prior to earning revenue. Instead, recognizing the delivery of the harvester typically necessitates moving the item from inventory to the cost of goods sold while also recognizing the revenue as it is realized upon delivery.