Question

The Hawthorn Manufacturing Company offers credit customer 2/10, n/30. The following events occurred:

1. On October 5, 2021 Hawthorne sold merchandise at a price of $20,000.
2. The customer paid $13,720 ($14,000 less the 2% discount) on October 14.
3. The customer paid the remaining balance of $6,000 on Novemeber 4.
What are the journal entries for each date using the gross and net method?

Answer 1

The journal entries for the transactions at Hawthorn Manufacturing Company using the gross and net method involve recognizing the sale, a partial payment with a discount, and a final payment after the discount period has lapsed.

Step-by-step explanation:

The student has asked for journal entries based on the gross and net method for the Hawthorn Manufacturing Company's sale and subsequent customer payments, which include a sales discount.

The transactions in question refer to a credit sale, a partial payment within the discount period, and a final payment after the discount period.

October 5, 2021 (Sale Date):

Accounts Receivable 20,000

Sales Revenue 20,000

October 14, 2021 (Partial Payment with Discount):

Cash 13,720

Sales Discounts 280 (2% of 14,000)

Accounts Receivable 14,000

November 4, 2021 (Remaining Balance Payment):

Cash 6,000

Accounts Receivable 6,000

October 5, 2021 (Sale Date):

Accounts Receivable 19,600 (net of 2% discount)

Sales Revenue 19,600

October 14, 2021 (Partial Payment):

Cash 13,720

Accounts Receivable 13,720

November 4, 2021 (Remaining Balance Payment):

Cash 6,000

Accounts Receivable 5,880

Sales Discounts Forfeited 120 (2% of 6,000 is recognized as additional revenue since the discount period has lapsed)