Question

Harvey's Wholesale Company sold supplies of $46,000 to Northeast Company on April 12 of the current year, with terms 1/15, n/60. Harvey uses the net method of accounting for cash discounts. What entry would Harvey's make on April 23, assuming the customer made the correct payment on that date?
A) Cash 45,540 Sales 460 Accounts receivable 46,000
B) Cash 46,000 Sales discounts 460 Accounts receivable 46,000 Interest revenue 460
C) Cash 45,540 Sales discounts 460 Accounts receivable 46,000
D) Cash 45,540 Accounts receivable 45,540

Answer 1

Answer:

D) Cash 45,540 Accounts receivable 45,540

Explanation:

The journal entry is shown below:

Cash A/c Dr $45,540

        To Accounts receivable A/c  $45,540

(Being cash is received in respect of goods sold)

The computation is shown below:

= Sold value of supplies - the sold value of supplies × discount percentage

= $46,000 - $46,000 × 1%

= $46,000 - $460

= $45,540

Since the net method is used so we debited the cash account and credited the account receivable account.