Question

On November 10 of the current year, Flores Mills sold carpet to a customer for $9,000 with credit terms 4/10, n/30. Flores uses the gross method of accounting for cash discounts. What is the correct entry for Flores on November 17, assuming the correct payment was received on that date

Answer 1

Answer:

Dr cash                 $8,640

Dr sales discount  $360

Cr accounts receivable              $9,000

Explanation:

First and foremost , it is noteworthy that receiving payment on  17 November means that customer paid within the stipulated discount period of ten days, hence entitled to a 4% discount off the purchase price.

Cash received=$9,000*(1-4%)=$ 8,640.00  

Discount allowed=$9,000-$ 8,640=$360

As a result of the above computations, the cash account would be debited with $8,640 while sales discount is debited with $360.

The accounts receivable is debited with the  full purchase price of $9,000