Question

On October 1, Darin Company sold merchandise in the amount of $6,500 to Schnee Company, terms 2/10, n/30. The items cost Darin $4,200 and the company uses the perpetual inventory method. On October 4, Schnee returns some of the merchandise. This merchandise had a selling price of $500 and a cost of $200. On October 8, Schnee Company paid Darin Company the correct amount due. 4. What journal entry does Darin Company make on October 8 to record Schnee’s payment?

a. Sales Revenue 120 Accounts Receivable 120 Cash 5,880 Accounts Receivable 5,880

b. Cash 6,000 Accounts Receivable 6,000

c. Cash 5,880 Sales Revenue 120 Accounts Receivable 5,760

d. Cash 6,500 Accounts Receivable 6,500

Answer 1

The correct answer is

A) Sales revenue 120 Account receivable 120 Cash 5880 Account Receivable 5880

Explaination

Since the balance in the account receivable account related to sale

= sale - sale return on october 4

= 6500 -500

= $ 6000

Since payment has been made with in 10 days 2 percent discount will be given and adjusted with sales revenue

So sales revenue will be debited with $ 120 (6000*2%) and account reecivable will be credited with $ 120.

Now cash paid by the customer = $ 5880 (6000-120) which will be debited in cash and account reecivable will be credited for $ 5880, since cash has been paid by customer

Therefore the correct answer is Part A) Sales revenue 120 Account receivable 120 Cash 5880 Account Receivable 5880