Question

Tracy Company, a manufacturer of air conditioners, sold 200 units to Thomas Company on November 17, 2021. The units have a list price of $450 each, but Thomas was given a 30% trade discount. The terms of the sale were 3/10, n/30. Required: 1. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on November 26, 2021, assuming that the gross method of accounting for cash discounts is used. 2. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on December 15, 2021, assuming that the gross method of accounting for cash discounts is used.

Answer 1

Answer and Explanation:

The Journal entries is shown below:-

1. a. Tracy Company Dr, $63,000 ($450 × 70% × 200)

To Sales $63,000

(Being sales is recorded)

b. Cash Dr, $61,110 ($63,000 - ($63,000 × 3%)

Sales discount $1,890 Dr, ($63,000 × 3%)

To Tracy Company $63,000

(Being cash and sales discount is recorded)

2. a Tracy Company Dr, $63,000 ($450 × 70% × 200)

To Sales $63,000

(Being sales is recorded)

b. No Journal entry is required

c. Cash Dr, $63000

To Tracy Company $63,000

(Being cash is recorded)