Final answer:
The correct journal entry for the scenario includes debiting Accounts Receivable and Cost of Goods Sold for $800 and $300 respectively, and crediting Sales for $800 and Inventory for $300. The shipping expense should be recorded in a separate entry debiting Shipping Expense and crediting Cash or Accounts Payable for $100.
Step-by-step explanation:
In this scenario, the seller has sold goods on credit with the terms of 2/10, n/30, FOB Destination. Under these terms, if the customer pays within 10 days, they receive a 2% discount, and the net amount is due within 30 days. FOB Destination indicates the seller is responsible for shipping, and the ownership of the goods transfers to the buyer upon delivery, not when they are shipped. Therefore, the correct journal entry for recording the transactions from the seller's perspective would include the credit sale (Accounts Receivable and Sales) and the cost associated with that sale (Cost of Goods Sold), but not the shipping costs. Shipping costs would be expensed when paid, or accrued as a liability if the seller is billed but has not yet paid the freight company at the time of sale. Thus, the answer options provided in the student's question do not fully reflect the correct journal entries; the shipping expense should be recorded separately from the sale transaction.
The correct entry for the initial sale and cost recognition would be:
- Debit Accounts Receivable $800
- Credit Sales $800
- Debit Cost of Goods Sold $300
- Credit Inventory $300
Later, when the shipping cost is incurred or if accrued:
- Debit Shipping Expense $100
- Credit Cash (or Accounts Payable if not paid immediately) $100