E7-5 (L02) EXCEL (Recording Sales Gross and Net) On June 3, Arnold Company sold to Chester Company merchandise having a sale price of $3,000 with terms of 2/10, n/60, f.o.b. shipping point. An invoice totaling $90, terms n/30, was received by Chester on June 8 from John Booth Transport Service for the freight cost. On June 12, the company received a check for the balance due from Chester Company. Instructions (a) Prepare journal entries on the Arnold Company books to record all the events noted above under each of the following bases. (1) Sales and receivables are entered at gross selling price. (2) Sales and receivables are entered at net of cash discounts. (b) Prepare the journal entry under basis 2, assuming that Chester Company did not remit payment until July 29.
SOLUTION
S.No. | Date | Account titles and Explanation | Debit ($) | Credit ($) |
A1. | June 3 | Accounts Receivable - Chester Company | 3,000 | |
Sales | 3,000 | |||
(To record sales) | ||||
June12 | Cash | 2,940 | ||
Sales Discounts (3,000*2%) | 60 | |||
Accounts Receivable - Chester Company | 3,000 | |||
(To record payment received) | ||||
1B. | June 3 | Accounts Receivable - Chester Company | 2,940 | |
Sales | 2,940 | |||
(To record sales) | ||||
June 12 | Cash | 2,940 | ||
Accounts Receivable - Chester Company | 2,940 | |||
(To record payment received) | ||||
2. | July 29 | Cash | 3,000 | |
Accounts Receivable - Chester Company | 2,940 | |||
Sales Discounts Forfeited | 60 | |||
(To record payment received) |
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