Final answer:
Oriole Inc. should record revenue of $40,584 for the sale to Grouper Construction, which is the sale price after an 11 percent trade discount applied to the list price of $45,600, using the gross method.
Step-by-step explanation:
To determine the revenue Oriole Inc. should record for the sale to Grouper Construction, we must first calculate the sale price after applying the trade discount. The list price of the building supplies is $45,600 and they offer an 11 percent trade discount.
Applying the trade discount:
- Trade Discount Amount = List Price x Trade Discount Rate
- Trade Discount Amount = $45,600 x 11% = $5,016
Subtracting the trade discount from the list price gives us the sale price:
- Sale Price = List Price - Trade Discount Amount
- Sale Price = $45,600 - $5,016 = $40,584
Since Oriole Inc. uses the gross method, they record the revenue at the sale price before any cash discounts (terms 2/10, n30) are taken. Therefore, the amount of revenue that Oriole should record for this sale is $40,584.
Since Oriole uses the gross method, revenue is recognized at the time of sale, regardless of when the payment is made. However, the payment terms of 2/10, n30 offer a cash discount of 2% if paid within 10 days, otherwise, the full amount is due within 30 days. This means that if Grouper pays within the discount period, the revenue recorded would be: $40,584 - (2% * $40,584) = $39,776.32.
Therefore, the revenue that Oriole Inc should record for this sale using the gross method would be $39,776.32.