Question

On February 3, Smart Company sold merchandise in the amount of $2,000 to Truman Company, with credit terms of 2/10, n/30. The cost of the items sold is $1,380. Smart uses the perpetual inventory system and the gross method. Truman pays the invoice on February 8, and takes the appropriate discount. The journal entry that Smart makes on February 8 is:

Answer 1

Cash $1,960

Sales discounts $40 ($2,000 × 0.02)

Accounts receivable $2,000

(Being the sale of merchandise is recorded)

Step-by-step explanation:

The journal entry is shown below:

On Feb 8

Cash $1,960

Sales discounts $40 ($2,000 × 0.02)

Accounts receivable $2,000

(Being the sale of merchandise is recorded)

While recording this we debited the cash as the cash is received and the discount is also given since the payment is made within 10 days and we credited the account receivable as it reduced the assets