Question

On June 3, Ivanhoe Company sold to Chester Company merchandise having a sale price of $4,200 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $94, terms n/30, was received by Chester on June 8 from John Booth Transport Service for the freight cost. On June 12, the company received a check for the balance due from Chester Company. Collapse question part (a) Prepare journal entries on the Ivanhoe Company books to record all the events noted above under each of the following bases. (1) Sales and receivables are entered at gross selling price. (2) Sales and receivables are entered at net of cash discounts

Answer 1

On June 3: Debit Account receivable with $4,200; and Credit Sales revenues also wit $4,200.

On June 12: Debit Cash with $4,116, Debit Sales discount with $84; and Credit Account receivable with $4,200.

Step-by-step explanation:

Ivanhoe Company

Date Details Dr ($) Cr ($)

June 3 Account receivable 4,200

Sales revenues 4,200

To record sales on terms to Chester Company

June 12 Cash 4,116

Sales discount 84

Account receivable 4,200

To record cash paid and sales discount to Chester

Note:

Chester Company paid within the discount period of 10 days. Therefore, he is entitled to discount of 2% and the cash paid and discount are calculated as follows:

Discount = $4,200 * 2% = 84%

Cash paid = $4,000 - $84 = $4,116