Question

On May 1, Wilton sold merchandise on account to Bates for $50,000 terms 3/15, net 45. On May 4, Bates returns merchandise with a sales price of $2,000. On May 16, Wilton receives payment from Bates for the balance due. Prepare journal entries to record the May transactions on Wilton’s books.

may 1 Accounts Receivable 50,000

Sales Revenue 50,000

4 Sales Returns and Allowances 2,000

Accounts Receivable 2,000

16 Cash ($48,000 - $1,440) 46,560

Sales Discounts ($48,000 x .03) 1,440

Accounts Receivable 48,000

question1. On may 16, why is there less $1440? and how?

and how sales discounts and why?

Answer 1

Answer) the term 3/15 net 45 means that wilton has sold goods on credit on which he will give a discount of 3 percent if the payment is made within 15 days and if not paid in 15 days the whole amount is to be paid with 45 days.

He sold goods worth $50000 of which $2000 were returned. Therefore net sales will be $48000.

As bates made due payment on 16 may i.e. the 15 th day from the sales of good; he will be eligible for the discount of $1440. So the net amount to be received after discount will be $48000 - $1440 = $46560

Calculation of sales discount =

(50000-20000)×3% = $1440

For any other query please comment and

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