Question

Record the following transactions on the books of Cohen Co. (Omit cost of goods sold entries.) (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
(a) On July 1, Cohen Co. sold merchandise on account to Tracy Inc. for $23,000, terms 2/10, n/30.
(b) On July 8, Tracy Inc. returned merchandise worth $2,400 to Cohen Co.
(c) On July 11, Tracy Inc. paid for the merchandise.

Answer 1

Answer:

a.

July 1

Accounts Receivable                23000 Dr

     Sales Revenue                         23000 Cr

b.

July 8

Sales Return                          2400 Dr

     Accounts Receivable           2400 Cr

c.

July 11

Cash                                                  20600 Dr

      Accounts Receivable                       20600 Cr

Explanation:

a.

The sales made on credit are recorded as a debit to the accounts receivable and a credit to sales revenue by the amount of sales assuming we use the gross method to record sale.

b.

The return of sales is recorded as a debit to the sales return account and a credit to the accounts receivable to reduce the amount due from accounts receivable.

c.

The remaining accounts receivable amount after sales return amounted to 23000 - 2400 = 20600

The sales terms were 2/10 which means a 2% discount was allowed if the accounts receivable pay within 10 days of sale. The payment is received after the discount period. Thus, we will not deduct the discount allowed and accounts receivable will pay fill $20600.