Question

Exercise 7-6 (Algo) Cash discounts; the gross method [LO7-3] Harwell Company manufactures automobile tires. On July 15, 2021, the company sold 1,100 tires to the Nixon Car Company for $60 each. The terms of the sale were 2/10, n/30. Harwell uses the gross method of accounting for cash discounts. Required: 1. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and collection on July 23, 2021. 2. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and collection on August 15, 2021.

Answer 1

Answer and Explanation:

1. Journal Entries

July 15 Accounts Receivable $66,000

Sale Revenue $66,000

July 23 Cash $64,680

Sales discount 1320

Accounts Receivable 66,000

2. Journal Entries

July 15 Accounts Receivable $66,000

Sale Revenue $66,000

August 15 Cash $66,000

Accounts Receivable 66,000