Question

Sheridan Company sells merchandise on account for $3400 to Carla Vista Company with credit terms of 1/10, n/30. Carla Vista Company returns $800 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Sheridan Company make upon receipt of the check?

Answer 1

Answer:

Net receipt on the check = $2,574

Explanation:

As the merchandise is sold on the basis on credit with therms as follows:

Discount of 1% if payment made within 10 days, and total credit period allowed = 30 days.

As for the given instance the the total sales was amounting to $3,400

Now, from this inventory worth $800 is returned.

Net sales = $3,400 - $800 = $2,600

Thereafter it is provided that payment is made within 10 days that is the discounted period, thus, net cash received against such sales shall be = Net sales - 1% discount of net sales

= $2,600 - ($2,600 $\times$ 1%)

= $2,600 - $26

= $2,574