Question

On May 12, 2013, Falwell Computing sold five computers to Computing Plus for $10,000, subject to terms 3/10, n30. Falwell uses the net method of accounting for sales discounts.

Required:

a. Prepare the journal entry to record the sale.
b. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on May 20, 2015.
c. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on June 5, 2015.

Answer 1

Explanation:

The Journal Entry is shown below:-

1. Accounts receivable Dr,   $9,700  

              To Sales                                $9,700

(Being of computer of sale is recorded)  

2.Cash Dr,                              $9,700  

         To Accounts receivable               $9,700

(Being amount collected is recorded)  

3. Cash                                        $10,000  

           To Accounts receivable                $9,700

sales discount forfeited                                 $300

(Being receipt of the payment is recorded)

Note :-

Net price = $10,000 - ($10,000 × 0.03)

= $10,000 - 300

= $9,700