Question

The Giles Agency offers a 8% trade discount when providing advertising services of $1,000 or more to its customers. Audrey’s Antiques decides to purchase advertising services of $3,300 (not including the trade discount), while Michael’s Motors purchases only $680 of advertising. Both services are provided on account.

Record both transactions for Giles Agency, accounting for any trade discounts.

Answer 1

Answer:

Accounts receivable - Audrey's Antiques      $3036 Dr

              Service Revenue                                     $3036 Cr    

Accounts Receivable - Michael's Motors      $680

               Service Revenue                                     $680

Explanation:

Both the services are provided on account which means that the services are provided on credit and cash against these services are yet to be received. Thus we debit the accounts payable that will be creadted because of these services and credit the service revenue.

The company gives 8% trade discount for sevices above $1000 and as Audrey's Antiques receives services of $3300 it will receive the trade discount while Michale's motors will not receive it.

The trade discount is provided on the list price and it is not recorded in the books of accounts. Thus the service provided to Audrey's will be recorded at 3300 - (3300 * 0.08) = $3036.