Question

On july 22, gary sold $25000 of inventory items on credit with the terms 3/15, net 30. payment on $16400 sales was received on august 1 and the remaining payment was received on august 12. assuming gary uses the gross method of accounting for sales discounts, which one of the following entries was made on august 1 to record the cash received?a. cash 14,700 sales discount 300 accounts receivable 15,000b. cash 15,000 accounts receivable 15,000c. cash 14,700 accounts receivable 14,700d. accounts receivable 300 sales discount forfeited 300

Answer 1

The journal entries to record this transaction are:

July 22, merchandise sold on account terms 3/15, net 30

Dr Accounts receivable 25,000

Cr Sales revenue 25,000

August 1, partial payment received on merchandise sold on account

Dr Cash 15,908

Dr Sales discounts 492

Cr Accounts receivable 16,400

August 12, collection of remaining accounts receivable

Dr Cash 8,600

Cr Accounts receivable 8,600

When a company uses the gross method of accounting, it will record the transactions using the full invoice amount, and the discounts will be recorded only if they are actually made.

Answer 2

a. cash 14,700 sales discount 300 accounts receivable 15,000

or

a. cash 16,400 sales discount 492 accounts receivable 15,908

Step-by-step explanation:

Term 3/15, n/30 means there is a discount of 3% is available on payment of due amount within discount period of 15 days after sale and net credit period of 30 days.

The cash receipt on august 1 is eligible for the discount and the cash net of due amount is received against the sales portion

According to Given data

Discount = 16,400 x 3% = $492

Cash Received = $16,400 - $492 = $15,908

According to Correct option

Discount = 15,000 x 2% = $300

Cash Received = $15,000 - $300 = $14,700

* Data given is Inconsistenet with the options.