Question

P & G Auto Parts sells parts to Ivanhoe Car Repair during 2021. P&G offers rebates of 1% on purchases up to $60000 and 2% on purchases above $60000 if the customer’s purchases for the year exceed $200000. In the past, Ivanhoe normally purchases $300000 in parts during a calendar year. On March 25, 2021, Ivanhoe Car Repair purchased $64000 of parts. The journal entry to record the purchase includes a __________.

Answer 1

Dr. Account Receivable $63,320

Cr. Sales Revenue $63,320

Step-by-step explanation:

P&G offers a rebate of 1%^ up to purchases of $60,000 and 2% on purchases above $60,000.

As the Ivanhoe Car Repair normally purchases $300,000 in a year.

Amount of Purchase = $64,000

Rebate

Upto $60,000 = $60,000 x 1% = $600

Over $60,000 = ($64,000 - $60,000) x 2% = $80

Total rebate = $600 + $80 = $680

Net Sales = $64,000 - $680 = $63,320