Question

Harvey's Wholesale Company sold supplies of $46,000 to Northeast Company on April 12 of the current year, with terms 1/15, n/60. Harvey uses the net method of accounting for cash discounts. What entry would Harvey's make on April 23, assuming the customer made the correct payment on that date?

Answer 1

Answer:

Cash A/c Dr.                                                    $45,540

Discount Allowed Expense A/c Dr.               $460

                     To North East Company A/c                     $46,000

Cash discount allowed recorded on 23 April.

Explanation:

As for the provided information, Sales value = $46,000

Discount = 1% as payment is received within 15 days.

Therefore, value of discount = $46,000 $\times$ 1% = $460

While recording sales entry, Northeast Company would have been debited and sales would be credited with $46,000

Now, while receiving payments,

Entry will be

Cash A/c Dr.                                                    $45,540

Discount Allowed Expense A/c Dr.               $460

                     To North East Company A/c                       $46,000

Cash discount allowed recorded on 23 April.