Question

The Hawthorne Manufacturing Company offers credit customers 4/15, n/30. On October 5, 2019, Hawthorne sold merchandise at a price of $20,000 and sent the customer the invoice dated October 5th, 2019. The customer paid off their entire invoice on Oct 17th, 2019.
Provide the journal entries using the net method.

Answer 1

Journal entries using the net method :

Under net method sales are recorded at an invoice amount less Discount.

Date	Accounts title & explanation	Debit	Credit
October 5	Account receivable ( 20,000*96%)	19,200
	Sales revenue		19,200
October 17	cash	19,200
	Account receivable		19,200

The company offered credit terms 4/15 ,n/30 which means if the debtor pays the total amount with 15 days then he will get 4% discount, from the given information the customer paid within 15 days, so the customer is eligible for discount.