Question

- On November 11th, Smaller Company sold merchandise with a selling price of $8,000 on account to Rogers Office Supplies, with terms 2/10, n/30. No sales returns are expected. On November 17th, Smaller received the full amount due from Rogers Office Supplies. Prepare the journal entry for Smaller Company on November 17th, using the gross method.

Answer 1

Answer:

Cash $7,840 (debit)

Discount allowed $160 (debit)

Accounts Receivable $8,000 (credit)

Explanation:

When the Sale is made the following entry will be recorded :

Accounts Receivable $8,000 (debit)

Sales Revenue $8,000 (credit)

Since Rogers Office Supplies pays their Account within the discount period of 10 days they are entitled to a cash discount and would pay Small Company an amount net of cash discount of 2%.

Entries will be :

Cash $7,840 (debit)

Discount allowed $160 (debit)

Accounts Receivable $8,000 (credit)