Question

Barton Health Services provided care to a patient worth $1,200. Because the patient was over the age of 65, Barton granted the patient a 20% discount and the customer paid the correct amount in cash. How would Barton record the service transaction?
A. Cash 960
Service Revenue 960
B. Cash 960
Trade Discount 240
Service Revenue 1,200
C. Cash 1,200
Service Revenue 1,200
D. Cash 1,200
Trade Discount 240
Service Revenue 960

Answer 1

Answer:

A. Cash 960

Service Revenue 960

Explanation:

In the given transaction, the trade discount is not shown in the recording of the journal entry but the effect is to be seen in the journal entry.

Since the cash is paid for providing the service and give the patient a 20% discount.

So, the discount amount would be equal to

= Service cost × discount rate

= $1,200 × 20%

= $240

And, the journal entry would be shown below:

Cash A/c Dr       $960

    To Service Revenue $960

(Being service is provided for cash and discount is given)