Question

Piper Company sells merchandise on account for $1,800 to Morton Company with credit terms of 2/10, n/30. Morton Company returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Piper Company make upon receipt of the check?

Answer 1

The journal entry is as follows:

Cash A/c Dr. $1,176

Sales returns and allowances A/c Dr. $600

Sales discounts A/c Dr. $24

To accounts receivable $1,800

(To record the receipt of the check)

Workings:

Sales discount = 2% of ($1,800 - $600)

= 0.02 × $1,200

= $24