Question

M6-2 (Algo) Reporting Net Sales with Sales Discounts, Credit Card Discounts, and Sales Returns LO6-1

The following transactions were selected from among those completed by Cadence Retailers in November and December:
Nov. 20 Sold 20 items of merchandise to Customer B at an invoice price of $5,500 (total); terms 3/10, n/30.
25 Sold two items of merchandise to Customer C, who charged the $400 sales price on her Visa credit card. Visa charges Cadence Retailers a 2 percent credit card fee.
28 Sold 10 identical items of merchandise to Customer D at an invoice price of $9,000 (total); terms 3/10, n/30.
29 Customer D returned one of the items purchased on the 28th; the item was defective, and credit was given to the customer.
Dec. 6 Customer D paid the account balance in full.
20 Customer B paid in full for the invoice of November 20.
Required:
Assume that Sales Returns and Allowances, Sales Discounts, and Credit Card Discountsare treated as contra-revenues; compute net sales for the two months ended December 31. (Do not round your intermediate calculations.)

Answer 1

Sales journal Total $6917, sales account Cr: $6,917, Customer B account Dr:$2,475, Customer C account Dr:$392, Customer D account Dr:$4,050, Return inward journal Total $405, Return inward Account Dr: $405, Customer D Account Cr: $405, Cash book Dr : cash $4,050, cashbook Dr: cash $2,475

Explanation :

Calculation of Discount , using the formula

Effective cost = i/1 - i × Days in the year/ CP - DP where CP = credit period, DP = Discount period, i = Discount rate per cent

November 20 CP = 30, DP = 10, i = 3% (3÷100 = 0.03)

0.03/1 - 0.03 × 360/30 - 10

= 0.03/0.97 × 360/20

= 10.8/19.4

=0.55 × 100%

= 55%

November 28 same as November 20

Nov 29 one item returned

= 9,000÷10

= 900

Discount 0.55 × 900 = 495

Sales journal

Date particular folio. Detail Total

$ $

Nov 20 merchandise to. 5,500

Customer B at (3,025)

invoice price $5,500 ----------

(Total) Less: discount.

(0.55 × 5,500) 2,475

Nov 25 item sold to

Customer C who

charges $400 sales price. 400

Less :2% card fee. (8)

(0.02 × 400) -------

392

Nov 28 identical merchandise

sold to customer D.

at invoice price $9,000. 9,000

Less : discount (0.55 × 9,000) (4,950)

---------

4,050

-----------

Total 6,917

--------------

Return inward journal

Date particular folio Detail Total

Nov 29. Customer D

one of item

purchase

Less (0.55 × 900) 900

(495)

-----------

405