Question

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

Check Explanation section.

Step-by-step explanation:

(1). The Gross method: in this kind of method, the sales and the cash are separately recorded.

Date: November 17, 2021.

Account titles and Explanation:

• Account receivable:

Lf = 0, Debit ($) = 42,000(100 units × 600 × 70% = 42,000). Credit ($). = 0.

• Sales revenue:

Lf = 0, Debit($) = 0, Credit ($) = 42,000(100 units × 600 × 70% = 42,000).

NB: the account receivable is debited in order to record sales.

Date: November 26, 2021.

Account titles and Explanation:

• cash:

Lf = 0, debit($) = 41,160( 42,000 × 98%), Credit ($) = 0.

• Sales discount:

Lf = 0, debit($) = 840( 42,000 × 2%). Credit ($) = 0.

• Account receivable:

Lf = 0, Debit($) = 0, credit ($) = 42,000.

(2). Date: November 17, 2021.

Account titles and Explanation:

• Account receivable:

Lf = 0, Debit ($) = 42,000(100 units × 600 × 70% = 42,000). Credit ($). = 0.

• Sales revenue:

Lf = 0, Debit($) = 0, Credit ($) = 42,000.

Date: December 15, 2021.

Account titles and Explanation:

• cash:

Lf = 0, debit($) = 42,000, Credit ($) = 0.

• Sales discount:

Lf = 0, debit($) = 42,000, Credit ($) = 0.

• Account receivable:

Lf = 0, Debit($) = 0, credit ($) = 42,000.