Question

Tracy Company, a manufacturer of air conditioners, sold 150 units to Thomas Company on November 17, 2021. The units have a list price of $640 each, but Thomas was given a 25% trade discount. The terms of the sale were 2/10, n/30. 3-a. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on November 26, 2021, assuming that the net method of accounting for cash discounts is used. 3-b. Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on December 15, 2021, assuming that the net method of accounting for cash discounts is used.

Answer 1

a)

Date	General journal	Debit	Credit
Nov. 17,2021	Account receivable	70560
	To sale revenue		70560
	(sale of air conditioner)
Nov 26,2021	Cash	70560
	To account receivable		70560
	(collection of cash)

3-b)

Date	General journal	Debit	Credit
Nov. 17,2021	Account receivable	70560
	To sale revenue		70560
	(sale of air conditioner)
Dec. 15,2021	Cash	72000
	To account receivable		70560
	To interest revenue		1440
	(collection of cash)

Sale price = 150*$ 640=$ 96000

Trade discount =$ 96000*25%= $ 24000

Cash discount if pay within 10 days = (96000-24000) *2%= 1440

In first case they will pay the amount within 10 days so they can got 2% cash discount.

And in the second case collection was done on December 15 , 2021 so they don't got 2% cash discount.