Question

James Bakery sells cupcakes to William's Restaurant. The credit terms are 1%/5/net 15. The selling price...

James Bakery sells cupcakes to William's Restaurant. The credit terms are 1%/5/net 15. The selling price is $1.5 per cupcake. The cost per cupcake is $1.00. James' uses a perpetual inventory system. James' most recent sale is for 500 cupcakes. What amounts are entered into each account to record the transaction in which account is paid within the discount period. (enter each answer using a number with two decimal places and no dollar signs)

Revenue
Cost of Goods Sold
Accounts Receivable
Discounts, Returns, and Allowances
Cash
Inventory
Business   Accounting   
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Answer #1

Revenue = Number of unit sold x selling price per unit

= 500 x 1.5

= 750

Discount = Revenue x Discount percentage

= 750 x 1%

= 7.5

Cash = Revenue - Discount

= 750 - 7.5

= 742.5

Cost of goods sold = Number of unit sold x cost price per unit

= 500 x 1

= 500

Revenue 750
Cost of Goods Sold 500
Accounts Receivable 750
Discounts, Returns, and Allowances 7.5
Cash 742.5
Inventory 500

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