Question

On June 3, Sweet Company sold to Chester Company merchandise having a sale price of $4,600 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $93, 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.
Prepare journal entries on the Sweet Company books to record all the events noted above under each of the following bases.
(1) Sales and receivables are entered at gross selling price.
(2) Sales and receivables are entered at net of cash discounts.

Answer 1

Answer and Explanation:

The journal entries are shown below:

1  Accounts Receivable - Chester Company $4,600    

             Sales $4,600  

(To record sales)    

Cash    $4,508    

Sales Discounts   $92   ($4,600 × 2%)

       Accounts Receivable- Chester Company 4,600  

(To record receiving of the payment)    

2 Accounts Receivable - Chester Company $4,508 ($4,600 × 0.98)

           To Sales $4,508  

(To record sales)    

Cash 4,508    

         To Accounts Receivable- Chester Company 4,508  

(To record the payment received )  

Cash   4,600    

      Accounts Receivable - Chester Company 4,508  

       Sales Discounts Forfeited 92  

(To record the payment received )