Question

merchandise costing 1200 is sold for 2200 on term 2/30,n/60. If the customer pays within the discount period. Prepare the journal entries needed at (a) time of sale and (b) collection of payment from the customer, assuming the company uses a perpetual inventory system with the gross method of recording sales discounts.

Answer 1

The journal entries are as follows:

(a) Accounts receivables [$2,200 - 2%] A/c Dr. $2,156

To Sales revenue $2,156

(To record the sale)

(b) Cost of Goods Sold A/c Dr. $1,200

To inventory $1,200

(To record the cost of goods sold)

(c) Cash A/c Dr. $2,156

To Accounts receivables $2,156

(To record payment within discount term)