Question

The company has an unadjusted debit balance in Accounts Receivable of $25,000 and an unadjusted credit balance of $10 in Allowance for Sales Discounts as of December 31. Of the $25,000 of receivables, $10,000 are within a 2% discount period that the company expects the buyers to take.Complete the necessary adjusting entry.

Answer 1

The journal entry is as follows

Sales discount Dr $190

      To Allowance for sales discounts $190

(Being the sales discount is adjusted)

It is computed below:

= Amount within the discount period × discount rate - adjusted credit balance in the allowance for sales discount

= $10,000 × 2% - $10

= $200 - $10

= $190