Question

Culver Co. uses the gross method to record sales made on credit. On June 1, 2020, it made sales of $51,000 with terms 4/15, n/45. On June 12, 2020, Culver received full payment for the June 1 sale. Prepare the required journal entries for Culver Co.

Answer 1

Answer and Explanation:

                                               Culver Co.

                                           Journal Entries

                                                                             Debit             Credit

June 1, 2020      Accounts receivables              $51,000

                                  Sales                                                        $51,000

                           Recording sale of goods on credit.

June 12, 2020    Bank                                          $48,960

                           Sales discount (Working 1)       $2,040

                                  Accounts receivables                              $51,000

                           Recording cash received from customer.

Working 1:

As per the terms of sale, the customer receives 4% cash discount if the payment is made within 15 days. The customer makes the payment on the 12th day, and thus, receives 4% cash discount.

Cash discount = 4% x $51,000 = $2,040

Amount received from customer = $51,000 - $2,040 = $48,960