Question

Assume a $1,000 sale is made on account to a customer with terms of 2/10,n/30 and is subsequently collected net of the discount within ten days of the sale. If the receivable had been originally recorded at the gross sales amount of $1,000, the journal entry to record the cash collection would include a debit to what accounts and for how much?

Answer 1

The journal entry to record the cash collection would include a debit to the Cash account and a credit to the Accounts Receivable account. The amount debited to the Cash account would be the net amount received, which is calculated by subtracting the discount from the gross sales amount.

Step-by-step explanation:

The journal entry to record the cash collection would include a debit to the Cash account and a credit to the Accounts Receivable account.

The amount debited to the Cash account would be the net amount received, which is calculated by subtracting the discount from the gross sales amount.

In this case, the discount is 2% of $1,000, so the net amount received would be $1,000 - ($1,000 * 0.02) = $980.

Therefore, the journal entry would be:

• Debit Cash: $980
• Credit Accounts Receivable: $1,000