Question

Jupiter Company sells goods to Danone Inc. by accepting a note receivable on January 2, 2017. The goods have a sales price of $610,000 (cost of $500,000). The terms are net 30. If Danone pays within 5 days, however, it receives a cash discount of $10,000. Past history indicates that the cash discount will be taken. On January 28, 2017, Danone makes payment to Jupiter for the full sales price.

Instructions:

(a) Prepare the journal entry(ies) to record the sale and related cost of goods sold for Jupiter Company on January 2, 2017, and the payment on January 28, 2017. Assume that Jupiter Company records the January 2, 2017, transaction using the net method.
(b) Prepare the journal entry(ies) to record the sale and related cost of goods sold for Jupiter Company on January 2, 2017, and the payment on January 28, 2017. Assume that Jupiter Company records the January 2, 2017, transaction using the gross method.

Answer 1

Journal entries for the sale and receipt of payment by Jupiter Company would differ based on whether the net method or the gross method is used. Under the net method, sales are recorded net of the discount, and payments are recorded accordingly. Under the gross method, full sales are initially recorded with discounts applied upon payment.

Step-by-step explanation:

The student has asked for the journal entries related to the sale of goods by Jupiter Company to Danone Inc., specifically under different accounting methods: the net method and the gross method.

Net Method For the sales transaction on January 2, 2017, Jupiter Company would record the sale with the anticipated cash discount under the net method as follows:

Credit Notes Receivable for $610,000

These entries reflect the recognition of sales revenue and cost of goods sold on the sale date, and the recognition of the cash receipt on the payment date, under each respective method.

Answer 2

Step-by-step explanation:

a. Net method

The journal entries are shown below:

January 2, 2017

Notes receivable A/c Dr $600,000 ($610,000 - $10,000)

To Sales revenue $600,000

(Being goods are sold on credit)

Cost of goods sold A/c Dr $500,000

To Inventory A/c $500,000

(Being the cost of goods sold is recorded)

On January 28, 2017

Cash A/c Dr $610,000

To Notes receivable A/c $600,000

To Sales discount A/c $10,000

(Being cash received is recorded)

b. Gross method

The journal entries are shown below:

January 2, 2017

Notes receivable A/c Dr $600,000 ($610,000 - $10,000)

To Sales revenue $600,000

(Being goods are sold on credit)

Cost of goods sold A/c Dr $500,000

To Inventory A/c $500,000

(Being the cost of goods sold is recorded)

On January 28, 2017

Cash A/c Dr $610,000

To Notes receivable A/c $600,000

(Being cash received is recorded)