Question

Prepare journal entries to record the following sales transactions in Cullumber Company's books, Cullumber uses a perpetual inventory system and the contract-based approach to revenue recognition. Cullumber has a stated policy that all sales are final, no returns or exchanges. 

June 16 Cullumber sold $ 16,900 of merchandise to Guiying Company, terms 2/10, 1/30, FOB destination. The cost of the merchandise sold was $8,619. 

 17 The correct company paid freight costs of $279.

 26 Cullumber received the balance due from Guiying.

Answer 1

Date	Account Titles and Explanation	Debit	Credit
June 16	Accounts receivable	$16900
	Sales		$16900
	(To record sales on account)
June 16	Cost of goods sold	$8619
	Merchandise inventory		$8619
	(To record cost of goods sold)
June 17	Freight out	$279
	Cash		$279
	(Cash payment for freight costs)
June 26	Cash	$16562
	Sales discounts	$338
	Accounts receivable		$16900
	(Collection on account)

Calculation:

Merchandise sold on term 2/10 n/30, that means

Discount = 2%

Discount period = 10 days

Maximum credit period = 30 days

Here,

Payment made on June 26 (on or before discount period)

So,

2% discount on Sales = 2% * $16900 = $338