Question

EHW Office Supplies, Inc. uses the perpetual inventory system. On September 4, 2019,EHW sold merchandise inventory on account at a price of $50,000 with payment terms of 1/10, n/30. The merchandise cost EHW $40,000. On September 12, 2019, the customer pays the proper amount due for the merchandise based on the credit terms. How much will be credited to Accounts Receivable when recording the collection

Answer 1

Answer:

$50,000

Explanation:

The cash payment was made within the discount period of 10 days,hence the amount received in respect of the sales on account is face value minus discount of 1%.

When sales was made EHW would have debited accounts receivable with $50,000 and credited same to sale revenue.

Cash received=$50,000*(1-1%)=$49,500

discount =$50,000-$49,500=$500

The appropriate entries for cash collection:

Dr cash    $49,500

Dr discount allowed  $500

Cr accounts receivable    $50,000