Question

Pierce Company sold to Stanton Company merchandise on account FOB shipping point, 2/10, net 30, for $20,000. Pierce prepaid the $500 shipping charge. Which of the following entries does Pierce make to record this sale?
A. Accounts Receivable Stanton, debit $20,000; Sales, credit $20,000
B. Accounts Receivable Stanton, debit $19,600; Sales, credit $19,600, and Accounts Receivable Stanton, debit $500; Cash, credit $500
C. Accounts Receivable Stanton, debit $20,100; Sales, credit $20,100
D. Accounts ReceivableStanton, debit $20,000; Sales, credit $20,000, and Delivery Expense, debit $500; Cash, credit $500

Answer 1

Answer:

D. Accounts ReceivableStanton, debit $20,000; Sales, credit $20,000, and Delivery Expense, debit $500; Cash, credit $500

Explanation:

The Sale transaction must be ;

Trade Receivable -  Stanton Company  $20,000 (debit)

Revenue $20,000 (credit)

Recognise the Revenue and Asset -  Stanton Company

Shipping Cost  $500 (debit)

Bank $500  (credit)

Recognise the shipping cost and de-recognise the cash asset