Question

Concord Company on July 15 sells merchandise on account to Pharoah Co. for $3800, terms 3/10, n/30. On July 20 Pharoah Co. returns merchandise worth $1800 to Concord Company. On July 24 payment is received from Pharoah Co. for the balance due. What is the amount of cash received

Answer 1

Answer:

The amount of cash received from this sale on July 24 is $1940.

Explanation:

The sell of merchandise on July 15 will result in an increase in sales revenue of $3800 and accounts receivables of $3800. The entry would be,

July 15 Accounts receivable     $3800 Dr

                 Sales revenue              $3800 Cr

The sales return of $1800 will reduce the amount of accounts receivables. The amount of accounts receivables outstanding and eligible to receive payment from will be (3800 - 1800) = $2000

The accounts receivables are offered a 3% discount if they pay within the 10 days of sale. On July 24, the payment is received within discount period and the discount allowed will be,

Discount allowed = 2000 * 0.03 = $60

The cash received will be $2000 - $60 = $1940