Question

Tamarisk, Inc. sells merchandise on account for $2600 to Morton Company with credit terms of 2/7, n/30. Morton Company returns $1100 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Tamarisk, Inc. make upon receipt of the check?

Answer 1

cash 1,470

sales discount 30

return goods 1,100

sales revenue 2,600

to record payment received from Morton Company

Step-by-step explanation:

on sale:

account receivable 2,600

sales revenue 2,600

we analize the commercial terms:

2/7 within the first 7 days, paying the invoice generates a 2% discounts

n/30 after that, until 30 days pays the nominal amount

balance at payment date:

sales for 2,600

returned goods: (1,100)

balance 1,500

discount 1,500 x 2% = 30

journal entry:

cash 1,470 (1,500 nominal - 30 discount)

sales discount 30

return goods 1,100

sales revenue 2,600