Question

Presented below are transactions related to Pharoah Company.

1. On December 3, Pharoah Company sold $618,600 of merchandise on account to Wildhorse Co., terms 3/10, n/30, FOB shipping point. The cost of the merchandise sold was $396,800. 2. On December 8, Wildhorse Co. was granted an allowance of $22,900 for merchandise purchased on December 3.

3. On December 13, Pharoah Company received the balance due from Wildhorse Co.

Assume that Pharoah Company received the balance due from Wildhorse Co., on January 2 of the following year instead of December 13. Prepare the journal entry to record the receipt of payment on January 2

Answer 1

Solution:

Journal entries

Dec-03	Accounts receivable a/c Dr	6,18,600
	To sales revenue a/c		6,18,600
	(To record credit sale)
Dec-03	Cost of goods sold a/c Dr	3,96,800
	To Inventory a/c		3,96,800
	(To record cost of merchandise sold)
Dec-08	Sales revenue a/c Dr	22,900
	To accounts receivable a/c		22,900
Dec-13	Cash a/c Dr	5,77,829
	Sales Discounts a/c Dr (595700 x 3%)	17871
	To accounts receivable a/c (618600-22900)		5,95,700

Jan-02	Cash a/c Dr	5,95,700
	To accounts receivable a/c		5,95,700