Question

A sales invoice included the following information: merchandise price, $12,100; terms 1/10, n/eom; FOB shipping point with prepaid freight of $341 added to the invoice. Assuming that a credit for merchandise returned of $2,400 is granted prior to payment and that the invoice is paid within the discount period, what is the amount of cash that should be received by the seller?

Answer 1

$10,041

Step-by-step explanation:

The journal entries should be:

merchandise sold on account, terms 1/10, n/eom

Dr Accounts receivable 12,100

Cr Sales revenue 12,100

prepaid freight charges $341, FOB shipping (when using FOB shipping point, the buyer pays the freight costs, when using FOB destination, the seller pays freight costs)

Dr Accounts receivable $341

Cr Cash 341

some merchandise was returned

Dr Sales returns and allowances 2,400

Cr Accounts receivable 2,400

invoice is paid within discount term

Dr Cash 9,944

Dr Sales discounts 97 (applies only to merchandise not freight)

Cr Accounts receivable 10,041 (includes accounts receivables for merchandise sold and freight charges)

Answer 2

the amount of cash that should be received by the seller is $9,603

Step-by-step explanation:

Transaction to be recorded on date of Sale

Trade Receivable $12,100 (debit)

Revenue $12,100 (credit)

Being Recognition of Revenue

Delivery Cost $341 (debit)

Bank $341 (credit)

Being Recognition of Delivery Costs

Credit for Merchandise Returned

Revenue $2,400 (debit)

Trade Receivable $2,400 (credit)

Payment made within the discount period

Discount Allowed $97 (debit)

Trade Receivable $97(credit)

Discount = ($12,100-$2,400)×1%=$97

Cash $9,603 (debit)

Trade Receivable $9,603 (credit)