On November 10 of the current year, Blue Co. sold materials to a
customer for $8,000 with credit terms 2/10, n/30. Blue Co. uses the
net method of accounting for sales discounts.
What entry would Blue Co. make on December 10, assuming the correct
payment was received on that date?
Multiple Choice
Cash | 8,160 | |
Accounts receivable | 8,000 | |
Sales discounts forfeited | 160 |
Cash | 8,000 | |
Accounts receivable | 7,840 | |
Sales discounts forfeited | 160 |
Cash | 8,000 | |
Accounts receivable | 8,000 |
Cash | 8,000 | |
Accounts receivable | 7,840 | |
Discounts revenue | 160 |
Sales = $8,000
Date of sale = November 10
Terms = 2/10, n/30
Date of payment = December 10
Since payment was received after the discount period of 10 days, hence sales discount will be forfeited.
Sales discount forfeited = Sales x Sales discount
= 8,000 x 2%
= $160
Sales discount previously debited, would be credited, now when actual payment was received.
The following journal entry would be made on December 10 by Blue Co.:
Cash | 8,000 | |
Accounts receivable | 7,840 | |
Sales discounts forfeited | 160 |
Second option is correct.
Get Answers For Free
Most questions answered within 1 hours.