Question

On June 3, Sheffield Company sold to Chester Company merchandise having a sale price of $5,200 with terms of 4/10, n/60, f.o.b. shipping point. An invoice totaling $95, 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.

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

Prepare the journal entry under basis 2, assuming that Chester Company did not remit payment until July 29.

Answer 1

1. Sales and Receivables are Entered at Gross Selling Price
Date	General Journal	Debit	Credit
Jun-03	Account Receivable	$5200
	Sales		$5200
Jun-12	Cash	$4992
	Sales Discount (5200*4%)	$208
	Account Receivable		$5200
2.Sales and receivables entered at Net Cash discounts
Jun-03	Account Receivable	$4992
	Sales		$4992
Jun-12	Cash	$4992
	Account Receivables		4992
(b) Assuming that comoany did not remit payment until July 29
Jul-29	Cash	$5200
	Account Receivable		$4992
	Sales Discount		$208