Question

*Nixon Car Company for $40 each

Exercise 7-7 (Algo) Cash discounts; the net method [LO7-3] Harwell Company manufactures automobile tires. On July 15, 2021, the company sold 2,300 tires to the Nixon Car Company for $40 each. The terms of the sale were 2/10, n/30. Harwell uses the net method of accounting for cash discounts. Required: 1. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and payment on July 23, 2021. 2. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and payment on August 15, 2021.

Answer 1

Transaction	Date	Account Titles and Explanation	Debit	Credit
1	July 15	Accounts receivable (2,300 X $40 X 98%)	$90,160	-
		Sales revenue	-	$90,160
		(To record sales)
	July 23	Cash	$90,160	-
		Account receivable	-	$90,160
		(To record cash received)
2	July 15	Accounts receivable	$90,160	-
		Sales revenue	-	$90,160
		(To record sales)
	August 15	Cash (2,300 X $40)	92,000	-
		Account receivable	-	$90,160
		Sales discount forfeited	-	$1,840
		(To record cash received)

Note: For entry on August 15th, If sales discount forfeited is not available in the list of accounts, please use interest revenue.