Question

Harwell Company manufactures automobile tires. On July 15, 2021, the company sold 1,000 tires to the Nixon Car Company for $500 each. The terms of the sale were 2/10, n/30. Harwell uses the gross method of accounting for cash discounts.

1. Prepare the journal entries to record the sale on July 15 and collection on July 23, 2021.

2. Prepare the journal entries to record the sale on July 15 and collection on August 15, 2021.

Answer 1

1.

July 15	Accounts Receivable	500,000
	Sales revenue		500,000
July 23	Cash	490,000
	Sales discount (500,000*2%)	10,000
	Accounts Receivable		500,000

.

July 15	Accounts Receivable	500,000
	Sales revenue		500,000
Aug 15	Cash	500,000
	Accounts Receivable		500,000