Question

On June 3, Ivanhoe Company sold to Chester Company merchandise having a sale price of $5,200...

On June 3, Ivanhoe Company sold to Chester Company merchandise having a sale price of $5,200 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $97, terms n/30, was received by Chester on June 8 from John Booth Transport Service for the freight cost. On June 12, the company received a check for the balance due from Chester Company.

Prepare journal entries on the Ivanhoe Company books to record all the events noted above under each of the following bases.

(1) Sales and receivables are entered at gross selling price.
(2) Sales and receivables are entered at net of cash discounts.


(If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Prepare the journal entry under basis 2, assuming that Chester Company did not remit payment until July 29. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Homework Answers

Answer #1

Base-1 Gross method:

Date Account title and explanation Debit Credit
June 3 Accounts receivable $5,200
Sales revenue $5,200
[To record sales revenue]
June 12 Cash $5,096
Sales discount [$5,200 x 2%] $104
Accounts receivable $5,200
[To record collections from customers]

Base-2 Net method:

Date Account title and explanation Debit Credit
June 3 Accounts receivable [$5,200 x 0.98] $5,096
Sales revenue $5,096
[To record sales revenue]
June 12 Cash $5,096
Accounts receivable $5,096
[To record collections from customers]

If received on July 29,

Date Account title and explanation Debit Credit
June 29 Cash $5,200
Accounts receivable $5,096
Discount lost [$5,200 x 2%] $104
[To record collections from customers]
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