Question

On March 12, Klein Company sold merchandise in the amount of $7,800 to Babson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein uses the perpetual inventory system and the gross method of accounting for sales. Babson pays the invoice on March 17, and takes the appropriate discount. The journal entry that Klein makes on March 17 is:

Answer 1

Dr cash $7,644

Dr sales discount $156

Cr accounts receivable $7,800

Step-by-step explanation:

The cash received is less of a discount of 2% since payment in respect of the sale was received within the discount period.

Cash received=$7,800-($7800*2%)=$ 7,644.00

Discount =$7800-$ 7,644=$156

The accounts receivable would be credited with $7,800 while cash and sales discount would be debited with $7,644 and $156 respectively