Question

Harwell Company manufactures automobile tires. On July 15, 2024, the company sold 1,000 tires to the Nixon Car Company for $65 each. The terms of the sale were 2/10, n/30. Harwell uses the gross method of accounting for cash discounts.

Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and collection on July 23, 2024.

Answer 1

To record the sale on July 15, 2024, debit Accounts Receivable: Nixon Car Company for $65,000 and credit Sales Revenue for $65,000. To record the collection on July 23, 2024, debit Cash for $63,700, credit Accounts Receivable: Nixon Car Company for $65,000, and debit Sales Discount for $1,300.

Step-by-step explanation:

To record the sale on July 15, 2024:

1. Debit Accounts Receivable: Nixon Car Company for $65,000
2. Credit Sales Revenue for $65,000

To record the collection on July 23, 2024:

1. Debit Cash for $63,700 ([$65,000 - ($65,000 * 0.02)])
2. Credit Accounts Receivable: Nixon Car Company for $65,000
3. Debit Sales Discount for $1,300 ([$65,000 * 0.02])