Question

On March 12, Medical Waste Services provides services on account to Grace Hospital for $10,200, terms 4/10, n/30. Grace pays for those services on March 20. Required: For Medical Waste Services, record the service on account on March 12 and the collection of cash on March 20.

Answer 1

Answer:

See explanation section

Explanation:

                                Medical Waste Services

                                     Journal entries

March 12     Accounts receivable - Grace Hospital   Debit     $10,200

                     Service revenue                                    Credit    $10,200

Note: Assuming the company used periodic inventory system. Therefore, it does not need to show the journal entry for cost of goods sold. Also the journal entry is recorded as gross method.

March 20    Cash                            Debit             $9,792    

                   Sales discount            Debit             $408 (Note - 1)

                   Accounts receivable - Grace Hospital    Credit    $10,200

As Grace Hospital paid within discount period, i.e., within 10 days, Medical Waste Services provided 4% discount.

Note - 1: Calculation of discount = $10,200 × 4% = $408.

Cash = $10,200 - $408 = $9,792