Tracy Company, a manufacturer of air conditioners, sold 200 units to Thomas Company on November 17, 2021. The units have a list price of $520 each, but Thomas was given a 25% trade discount. The terms of the sale were 2/10, n/30.
Exercise 7-5 (Algo) Part - 1
Required:
1. Prepare the journal entries to record the sale
on November 17 (ignore cost of goods) and collection on November
26, 2021, assuming that the gross method of accounting for cash
discounts is used.
2. Prepare the journal entries to record the sale
on November 17 (ignore cost of goods) and collection on December
15, 2021, assuming that the gross method of accounting for cash
discounts is used
SOLUTION
Price = 200 units * $520 * 75% = 78,000
S.No. | Date | Accounts titles and Explanation | Debit ($) | Credit ($) |
1. | November 17 | Accounts receivable | 78,000 | |
Sales revenue | 78,000 | |||
November 26 | Cash | 76,440 | ||
Sales Discounts (78,000*2%) | 1,560 | |||
Accounts receivable | 78,000 | |||
2. | November 17 | Accounts receivable | 78,000 | |
Sales revenue | 78,000 | |||
December 15 | Cash | 78,000 | ||
Accounts receivable | 78,000 |
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