Question

Topic #1: Questions to discuss: Question 2, 3 a) Explain the step-by-step procedures you used to find the answer and what you learned by completing the question.(How to Solve each question) b) Incorporate in-text citations from our Textbook and discuss the significance of the learning topic (what does the concept mean to you and why is it important?).

Answer 1

2 a)         On 6th Jan, the seller sold goods on credit on the terms that if the purchaser makes the payment in next 10 days, he will get a discount of 3% (3% of 11000 comes to 330) or if he pays in 30 day, he will get no discount.

Understand that the credit period allowed to the purchaser from seller is 30 days wherein to persuade the purchases to make prompt payment, the seller has given his the discount scheme.

Accounts receivable                                       11000

To Sales Revenue.                                                           11000

On 6th Jan, the seller has made credit sales. In order to book this credit sale transaction we should debit accounts receivable (since debtors are debited) and we should credit sales revenue since sales are always credited.

2 b)        On 16th Jan, in order to avail the 3% sales discount the purchaser makes the payment in 10 days. As calculated above, the discount shall be 330.

Now to book the entry, cash has to be debited (since an asset has been created), sales discount should also be debited (since sales discount is an expense to seller) and accounts receivable should be credited (we have credited accounts receivable because Harley is no longer the debtor of Bonita Industries as he has paid all his dues. Since we had debited it earlier, we need to credit it now)

Cash                                                                      10670

Sales Discount                                                   330

To Accounts Receivable                                                                11000