Question

Harwell Company manufactures automobile tires. On July 15, 2018, the company sold 1,600 tires to the Nixon Car Company for $40 each. The terms of the sale were 2/10, n/30. Harwell uses the net method of accounting for cash discounts.

Required:
1. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and payment on July 23, 2018.
2. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and payment on August 15, 2018.

Answer 1

1. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and payment on July 23, 2018.

Date	accounts & explanation	debit	credit
July 15	Account receivable (1600*40*98%)	62720
	Sales revenue		62720
	(To record sales)
July 23	Cash	62720
	Account receivable		62720
	(To record amount received)

1. Prepare the journal entries to record the sale on July 15 (ignore cost of goods) and payment on August 15, 2018..

Date	accounts & explanation	debit	credit
July 15	Account receivable (1600*40*98%)	62720
	Sales revenue		62720
	(To record sales)
Aug 15	Cash	64000
	Sales discount forfeited		1280
	Account receivable		62720
	(To record amount received)