Question

On March 1, Sather Co. sold merchandise to Boone Co. on account, $33,400, terms 2/15, n/30. The cost of the merchandise sold is $17,700. The merchandise was paid for on March 14. Assume all discounts are taken. Required: Journalize the entries for Sather Co. and Boone Co. for the sale, purchase, and payment of amount due. Refer to the appropriate company’s Chart of Accounts for exact wording of account titles.

Answer 1

Answer:

Sale Entry As on 1st March

Accounts Receivable   Dr.$33,400

Sales                              Cr.$33,400

Payment Entry on 14 March Will be

Cash                    Dr. $32,732

Sales Discount   Dr.$668  ($33,400*2%)

Accounts Receivable      Cr.$33,400

Purchase Entry

Purchases       Dr.$17,700

Accounts Payable Cr.$17,700

Explanation:

The term 2/15, n/30 represents 2% discount if the payment is made in 15 days from the date of sale, otherwise credit period is 30 days.

As our payment is received on 14th day, therefore customer is given discount of 2%

Please note that above journal entries are made on gross method