Question

On November 10 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for sales discounts. What entry would Cherokee make on December 10, assuming the correct payment was received on that date

Answer 1

Answer:

C.Accounts receivable 7,840 Cash discounts 160 Sales 8,000

Explanation:

I think your question is missed of key information, allow me to add in and hope it will fit the original one.  

a. Accounts receivable 8,000 Sales 8,000

b. Accounts receivable 7,840 Sales 7,840

c. Accounts receivable 7,840 Cash discounts 160 Sales 8,000

d. Accounts receivable 8,000 Cash discounts 160 Sales 7,840

My answer:

Given:

• Materials sold = $8,000

• Credit terms = 2/10, n/30

Journal Entry for record sale on 10th November

Date                Account                                                Debit              Credit

Nov 10              Cash                                                   $8000  

                       Account receivable                                                    $7840

                       (8000 × 98%)

                       Sales discount                                                             $160

So Accounts receivable 7,840 Cash discounts 160 Sales 8,000  we choose C

Answer 2

Answer:

The customer was to pay the discounted sum of $7,840.00 since the correct payment was received by Cherokee industries on the 20th of November.

Explanation:

$8000.00

Credit terms of 2/10, n/30

using the Net Discount Method for sales

2/10 means that the customer stands the chance of receiving a discount of 2% if he pay the outstanding on the invoice within 10 days of the purchases.

Therefore, Discount rate of 2% or 0.02 of $8000.00 =

$8000.00 x 0.02 = $160.00

∴ $8,000.00 - $160.00 =  $7,840.00