Question

Harwell Company manufactures automobile tires. On July 15, 2021, the company sold 1,900 tires to the Nixon Car Company for $45 each. The terms of the sale were 3/10, n/30. Harwell uses the gross method of accounting for cash discounts. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and collection on July 23, 2021.

Answer 1

Solution:

The journal entries to record the sale on July 15 (ignore cost of goods) and collection on July 23, 2021:

Date                      General Journal                      Debit         Credit

July 15, 2021         Accounts receivable             50,000

                             Sales revenue                                          50,000

July 23, 2021             Cash                                 49,000

                           Sales discounts                        1,900

                          Accounts receivable                                     47,100

Date                      General Journal                   Debit              Credit

July 15, 2021       Accounts receivable          47,100

                                Sales revenue                                        47,100

Aug. 15, 2021          Cash                                47,100

                             Accounts receivable                                 47,100