Question

13. On November 10 of the current year, Flores Mills sold carpet to a customer for $7,800 with credit terms 2/10, n/30. Flores uses the gross method of accounting for sales discounts. What is the correct entry for Flores on November 17, assuming the correct payment was received on that date?

14. Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April 12 of the current year with terms 3/15, n/60. Oswego uses the gross method of accounting for sales discounts. What entry would Oswego make on April 12?

15. Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April 12 of the current year with terms 2/15, n/60. Oswego uses the gross method of accounting for sales discounts. What entry would Oswego make on April 23, assuming the customer made the correct payment on that date?

16. Oswego Clay Pipe Company sold $46,300 of pipe to Southeast Water District #45 on April 12 of the current year with terms 3/15, n/60. Oswego uses the gross method of accounting for sales discounts. What entry would Oswego make on June 10, assuming the customer made the correct payment on that date?

Answer 1

Explanation from the point of seller

In Gross method accounting if seller give credit to its customer and to get early payment he give cash discount to them while making the payment but while raising the invoice the seller raise the bill at gross amount  without giving discount at the time of generation of invoice , seller assumed that if customer opts for the early payment then only discount will be displayed in books other wise there is no need to Record entry of discount in books.

date	entry	amount Dr ($)	Amount ($) CR
13) Nov 10	Accounts Receivable A/c   To Sale of carpets A/c	7800	7800
	( Being Carpet sold at credit )
13) Nov 17	Cash A/c Sales Discount A/c To Account Receivable A/c	7644* 156	7800
	( Being Payment received from customer and discount allowed @2%of 7800)
	* (7800-2% of 7800=7644)
	Customer did the payment with in the deadline to achieve the discount of 2%
14)	Journal Entry
April 12	Account Receivable A/c To sales of pipes A/c	46000	46000
	( Being Pipes sold On credit to Southeast Water District #45)
15)
April 23	Cash A/c Sales Discount A/c To Account Receivable A/c	45080 920	46000
	Being Payment received from Southeast Water District #45 And discount allowed @2% of 46000)
	* (46000-2%of 46000=45080
	( In this customer paid the amount within 15 days so he is eligible for cash discount of 2%)
16)
april 12	Account Receivable A/c To sales of pipes A/c	46000	46000
	( Being Pipes sold On credit to Southeast Water District #45)
june 10	cash A/c To Account receivable A/c	46000	46000
	(being payment received from Southeast Water District #45)
	In this entry customer not opted from cash discount as he opted to pay amount after 15 days but with in 60 days)