Final answer:
The journal entry on November 26 for Tracy Company will involve debiting Accounts Receivable and Sales Discounts, and crediting Cash for the sales transaction to Thomas Company, if Thomas took advantage of the 2/10, n/30 sales discount.
Step-by-step explanation:
The question relates to the recording of a sales transaction under the periodic inventory system within accounting. On November 17, 2018, Tracy Company sold 100 air conditioning units to Thomas Company with a list price of $500 each, but Thomas was entitled to a 30% trade discount. This discount reduces the amount receivable from Thomas Company. The sales terms provided were 2/10, n/30, which means that Thomas Company can take a 2% discount if they pay within 10 days; otherwise, the net amount is due in 30 days. Since the question asks for the journal entry on November 26, which is within the discount period, and assuming that Thomas Company took advantage of the discount, we record the payment with the discount applied. The journal entry would be a debit to Accounts Receivable for the discounted amount, a debit to Sales Discounts for the amount of the discount taken, and a credit to Cash for the total payment received.
Here is how the entry would look accounting for the trade discount (30% off $500 = $350 per unit, so 100 units x $350 = $35,000) and the sales discount (2% off $35,000 = $700):
- Accounts Receivable - $34,300
- Sales Discounts - $700
- Cash - $34,300