Question

g On March 12, Medical Waste Services provides services on account to Grace Hospital for $9,700, terms 2/10, n/30. Grace pays for those services on March 20. For Medical Waste Services, record the service on account on March 12 and the collection of cash on March 20

Answer 1

Medical Waste Services recorded a $9,700 service on account to Grace Hospital on March 12 and collected a discounted amount of $9,506 on March 20 due to early payment, also recording a sales discount of $194.

Step-by-step explanation:

On March 12, Medical Waste Services provided services to Grace Hospital and issued an invoice for $9,700 with payment terms of 2/10, n/30. This means if Grace Hospital pays the invoice within 10 days, they will receive a 2% discount; otherwise, the net amount is due in 30 days. To record the service on account, Medical Waste Services would make a journal entry on March 12, debiting Accounts Receivable and crediting Service Revenue.

Since Grace Hospital paid for the services on March 20, within the discount period, they are eligible for a 2% discount on the invoice amount ($9,700 x 0.02 = $194). Therefore, Medical Waste Services would record the collection of cash by debiting Cash for the discounted amount ($9,700 - $194 = $9,506), debiting Sales Discounts for $194, and crediting Accounts Receivable for the full invoice amount of $9,700.

Answer 2

March 12

Dr. Account receivable $9,700

Cr. Sales $9,700

March 20

Dr. Cash $9,506

Dr. Sales Discount $194

Cr. Account receivable $9,700

Step-by-step explanation:

Term 2/10, n/30 means there is a discount of 2% is available on payment of due amount within discount period of 10 days after sale and net credit period of 30 days.

According to given data

Sales = $9,700

As the payment is made within discount period, so discount will be availed

Discount = $9,700 x 2% = $194

Payment = $9,700 - $194 = $9,506

Discount of $194 is an expense.