Question

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.

Answer 1

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)