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zhenek [66]
3 years ago
7

E7.5 (LO 2) (Recording Sales Gross and Net) On June 3, Arnold Company sold to Chester Company merchandise having a sale price of

$3,000 with terms of 2/10, n/60, f.o.b. shipping point_______An invoice totaling $90, terms n/30, was received by Chester on June 8 from John Booth Transport Service for the freight cost. On June 12, the company received a check for the balance due from Chester Company.
Business
1 answer:
Assoli18 [71]3 years ago
4 0

Answer:

See explanation

Explanation:

Requirement 1 (A)

If the sales and receivables are at gross selling price, the discount will not be deducted from the selling amount during the recording process.

i) June 3. Debit    Accounts receivable       $3,000

               Credit            Sales revenue                           $3,000

Since the cost of goods sold is not given, it is assumed that the company uses periodic inventory system. Sales inventory on account with a term of 2/10, n/60. It means that if Chester pays the bill within 10 days, the seller will give 2% discount to the buyer. However, the bill has to be paid within 60 days.

ii) June 12.  Debit    Cash/Bank          $2,940

                  Debit     Sales discount           60

                 Credit               Accounts receivable          $3,000

As Chester company pays the bill within 10 days, according to the terms and conditions, Chester receives sales discount of $3,000 × 2% = $60.

Requirement 1 (B)

If the sales and receivables are at net selling price, the discount will be deducted from the selling amount during the recording process.

i) June 3. Debit    Accounts receivable       $2,940

               Credit            Sales revenue                           $2,940

Note: <em>Sales are on account with a term of 2/10, n/60. In net selling method, the discount was deducted during the selling time. If Chester pays the bill within 10 days, the seller will give 2% discount to the buyer. If the company fails to provide, the discount will become forfeited.</em>

ii) June 12.  Debit    Cash/Bank          $2,940

                  Credit               Accounts receivable          $2,940

As Chester company pays the bill within 10 days, according to the terms and conditions, Chester receives sales discount.

Requirement 2

As Chester company has paid the bill on July 29, the company are not getting the discount from Arnold Company. To record the payment entry -

a) Gross selling method -

July 29. Debit    Cash/Bank          $3,000

                  Credit               Accounts receivable          $3,000

No discount was provided.

b) Net selling method -

July 29. Debit    Cash/Bank          $3,000

                  Credit               Accounts receivable          $2,940

                  Credit               Sales discount forfeited            60

As Chester failed to pay within discount period, sales discount was forfeited.

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Nike decides to invest $60,000,000 into a shoe factory in Vietnam. What is the opportunity cost in this situation
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<h3>What is Opportunity Cost?</h3>
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Explain the law of one price and the theory of purchasing power parity. Why doesn't purchasing power parity explain all exchange
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Answer:

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The law of one price establishes that the product or service price will remain the same for all the entire world. It is necessary to take into account for this law that the price of the currency  needs to be also the same and that the price of the product or service would not be affected by other factors such as additional buyers or sellers in the market.

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