Question

Metlock, Inc. sells merchandise on account for $2000 to Morton Company with credit terms of 2/8, n/30. Morton Company returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Metlock, Inc. make upon receipt of the check?

Answer 1

Explanation:

The journal entry is shown below:

Cash A/c Dr $1,372

Sales Returns and Allowances A/c Dr $600

Sales Discounts A/c Dr $28

               To Accounts Receivable A/c $2,000  

(Being the cash is received)

The computation is shown below:

For sales discount

= (Sales value of merchandise - returned goods) × discount rate

= ($2,000 - $600) × 2%

= $28

And, the remaining balance is debited to the cash account