Question

On June 3, Oriole Company sold to Chester Company merchandise having a sale price of $3,600 with terms of 2/10, 1/60, fo.b. shipping point. An invoice totaling $93, terms n/30, was received by Chester on June 8 from John Booth Transport Service for the freight cost. On June 12, the company received a check for the balance due from Chester Company Prepare journal entries on the Oriole Company books to record all the events noted above under each of the following bases. (1) Sales and receivables are entered at gross selling price. (2) Sales and receivables are entered at net of cash discounts. (If no entry is required, select "No Entry for the account titles and enter for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) No. Date Account Titles and Explanation Debit Credit June 12

Answer 1

(1) Gross selling price

we will pass journal entries with full value of sales i.e $3,600 (gross price) and pass another entry to record sales discount when payment is received.

June 3	Account receivable	$3,600
	sales		$3,600
	(to record sales)
June 12	Cash ($3,600-$72)	$3,528
	sales discount ($3,600*2%)	$72
	Account receivable		$3,600
	(To record receipt of payment after discount)

discount = 2/10, discount 2% will be provided if payment is made within 10 days of invoicing

$3,600*2% (as payment is made within 10 days of June 3 i.e June 12 discount 2% will be provided)

(2) Net of cash discount

			debit	credit
	June 3	Account receivable	$3,528
		sales discount ($3,600*98%)		$3,528
	June 12	Cash	$3,528
		Account receivable		$3,528
		(To record receipt of payment)

Note: terms of sale says FOB it means that buyer is required to pay for shipping. so there will be no entry of shipping cost $93 in oriole's books of account in this case.

Answer 2

(2) Net of cash discount journal entry Credit $3,528 to Sales Revenue not sales discount