Question

The Giles Agency offers a 12% trade discount when providing advertising services of $1,000 or more to its customers. Audrey’s Antiques decides to purchase advertising services of $3,500 (not including the trade discount), while Michael’s Motors purchases only $700 of advertising. Both services are provided on account. Record both transactions for Giles agency

Answer 1

The journal entries are as follows

In the books of Giles Agency

1. Account receivable  Dr $3,080

              To Service revenue $3,080

(Being the service is provided in account)

The computation is shown below:

= $3,500 - $3,500 × 12%

= $3,500 - $420

= $3,080

2. Account receivable  Dr $700

              To Service revenue $700

(Being the service is provided in account)