Question

On June 3, Crane Company sold to Chester Company merchandise having a sale price of $3,800 with terms of 4/10, n/60, f.o.b. shipping point. An invoice totaling $91, 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.

a) Prepare journal entries on the Crane 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.

Answer 1

Note :Seller sold goods with term F.O.B shipping point, which means freight cost should be paid by buyer.

(1) Sales and receivables are entered at gross selling price.

Journal Entries

Date	Accounts Titles & Explanation	Debit($)	Credit($)
June 3	Accounts receivables	3,800
	Sales		3,800
	(To record goods sold to Chester Company)
June 12	Cash	3,648
	Discount on Sales ($3,800 * 4 %)	152
	Accounts receivables		3,800
	(To record collection & discount on account of goods sold)

(2) Sales and receivables are entered at net of cash discounts.

Journal Entries

Date	Accounts Titles & Explanation	Debit($)	Credit($)
June 3	Accounts receivables	3,648
	Sales		3,648
	(To record sales net of cash discounts )
June 12	Cash	3,648
	Accounts receivables		3,648
	(To record collection on account of goods sold )