Question

On January 6, Metlock Inc. sells merchandise on account to Harley Inc. for $11,400 with terms 1/10, n/30. On January 16, Harley pays the amount due. Prepare entries on Metlock Inc.'s books to record the sale and related collection.

a. Jan. 6: Accounts Receivable $11,400, Sales Revenue $11,400
b. Jan. 16: Cash $11,286, Sales Discount $114, Accounts Receivable $11,400
c. Jan. 6: Cash $11,400, Sales Revenue $11,400
d. Jan. 16: Accounts Receivable $11,400, Cash $11,286, Sales Discount $114

Answer 1

On January 6, an entry is made debiting Accounts Receivable and crediting Sales Revenue for $11,400. On January 16, when Harley pays, Cash is debited for $11,286, Sales Discount is debited for $114, and Accounts Receivable is credited for $11,400.

Step-by-step explanation:

The student's question pertains to recording the sale and collection of accounts receivable with a sales discount. On January 6, Metlock Inc. sells merchandise on account to Harley Inc. for $11,400 with terms 1/10, n/30, which means that Harley can take a 1% discount ($114) if it pays within 10 days. Since Harley pays on January 16, they can take advantage of this discount.

Therefore, the correct entries for Metlock Inc.'s books would be:

• Jan. 6: Debit Accounts Receivable $11,400, Credit Sales Revenue $11,400
• Jan. 16: Debit Cash $11,286, Debit Sales Discount $114, Credit Accounts Receivable $11,400

These entries reflect the sale and the subsequent payment with the discount applied.