Question

On February 3, Smart Company sold merchandise in the amount of $2,700 to Truman Company, with credit terms of 1/10, n/30. The cost of the items sold is $1,865. Smart uses the perpetual inventory system and the gross method. Truman pays the invoice on February 8, and takes the appropriate discount. The journal entry that Smart makes on February 8 is:

Answer 1

Answer:

Journal entry on February 8 :

Debit  : Cash $2,673

Debit  : Discount received $27

Credit : Account Receivable $2,700

Explanation:

The journal entry that Smart makes on February should show the Cash payment net of cash discount, a decrease in Total Account Receivable balance and recognition of an expense discount allowed up to 1 %.