Question

Brief Exercise 5-42 Sales Discounts Not Taken Gordon's Grocers purchases bread from Buddy's Bread Company at $1.45 per loaf. Gordon's engaged in a customer service contract to purchase 20,000 loaves of Buddy's bread. Buddy offered credit at terms of 2/10, n/30 and expects Gordon to pay within the discount period. Required: Prepare the journal entry assuming the payment is made after 10 days (after the discount period). If an amount box does not require an entry, leave it blank. Record collection after discount period

Answer 1

SALES DISCOUNT NOT TAKEN:

Recording of journal entry assuming the payment is made after 10 days (after the discount period):

- Buddy bread compaby sold 20000 loaves to Gordon at $1.45 each.

Total sales on credit = 20000×$1.45 = $29000

- These sales were made on credit terms 2/10, n/30, which means if the customer paid within the credit period of 10 days then the sales discount of 2% will be given on gross sales. Otherwise, no discount will be given.

- The actual journal entry made at the time of sales made on credit is

Account Recievables Dr. $29000

Sales Revenue $29000

- Now the payment have been recieved after 10 days credit period and hence no discount will be given.

- While recording collection, cash have been recieving (comes in) and should be debited. Correspondingly, the accounts recievable balance (assets balance) have been decreased and should be credited.

The entry for collection after discount:

General Journal	Debit	Credit
Cash	$29000
Accounts Recievable		$29000
(To record collection after discount)

______×______

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