Question

Smith CO. sold $100,000 on December 26, 2019 to a client with the sales discount terms...

Smith CO. sold $100,000 on December 26, 2019 to a client with the sales discount terms 3/10 net 40. What do the terms mean? If the client paid on January 4, 2020 which method (Gross or Net) makes higher profit for 2019? What is the journal entry to record the cash received on January 4, 2020 under the Gross method and under the Net method?
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The terms of the sale 3/10 means that if the amount is paid by the client within 10 days, he will get 3% discount. If he pays after 10 days there will be no discount.

Sales recorded under gross method = $100,000

Sales recorded under net method = $100,000 - 3% = $97,000

Sales under gross method is higher for 2019. Gross method makes higher profits in 2019.

Journal entry on Jan 4th:

Gross method
Accounts and Explanation Debit Credit
Cash $97,000 -
Sales discount $3,000 -
Accounts receivable - $1,00,000
Net method
Accounts and Explanation Debit Credit
Cash $97,000 -
Accounts receivable - $97,000
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Sampson Co. sold merchandise to Batson Co. on account, $28,400, terms 2/15, net 45 on December...
Sampson Co. sold merchandise to Batson Co. on account, $28,400, terms 2/15, net 45 on December 26. The cost of the goods sold is $21,300. The Batson Co. paid the invoice on December 31, within the discount period. Assume both Sampson and Batson use a perpetual inventory system. Required: Prepare the entries that both Sampson and Batson Companies would record for the above. Refer to the Chart of Accounts for exact wording of account titles. If no entry is required,...
Citron Mechanical Systems makes all sales on credit, with terms 1/15, n/30. During 2019, the list...
Citron Mechanical Systems makes all sales on credit, with terms 1/15, n/30. During 2019, the list price (prediscount) of services provided was $687,500. Customers paid $482,000 (list price) of these sales within the discount period and the remaining $205,500 (list price) after the discount period. Citron uses the gross method of recording sales. Required: 1. Compute the amount of sales that Citron recorded for 2019. 2. Compute the amount of cash that Citron collected from these sales. 3. Assuming the...
Sheridan Co. uses the gross method to record sales made on credit. On June 1, 2020,...
Sheridan Co. uses the gross method to record sales made on credit. On June 1, 2020, it made sales of $55,000 with terms 4/15, n/45. On June 12, 2020, Sheridan received full payment for the June 1 sale. Prepare the required journal entries for Sheridan Co. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record...
ABC Company sold and shipped merchandise to XYZ Company on December 28, 2019, with shipping terms...
ABC Company sold and shipped merchandise to XYZ Company on December 28, 2019, with shipping terms of FOB shipping point. ABC notified XYZ of the shipment on December 28, 2019. XYZ received the merchandise on January 3, 2020. Which one of the following statements is true? a. XYZ Company should record a liability for the purchase on January 3, 2018 b. ABC Company should record sales revenue on December 28, 2017 c. XYZ Company must pay the transportation costs in...
On January 1, 2019, The Pangborn Company issued $100,000 of its ten-year, 6% bonds payable at...
On January 1, 2019, The Pangborn Company issued $100,000 of its ten-year, 6% bonds payable at $108,000 to yield a market rate of 5%. The bonds were dated January 1, 2019, and interest is paid semiannually on each June 30 and each December 31. The effective interest method is used for amortization and no adjusting journal entries were made during the year. Prepare the journal entry for the sale of the bonds. Prepare the journal entry to record the first...
Company X sold merchandise for $50,000 with terms 3/30, n/90 on January 1. On January 29,...
Company X sold merchandise for $50,000 with terms 3/30, n/90 on January 1. On January 29, Company X received half the payment in cash. On March 1, they received the remaining half. Prepare the journal entries to record the sale and the receipt of cash under (1) the gross method and (2) the net method. What effect does using the gross method v s. the net method have on the company urrent ratio after the sale? After the receipt of...
Assume the same facts as in Part I (Sarabeth sold goods to Izzy Corp. for $100,000;...
Assume the same facts as in Part I (Sarabeth sold goods to Izzy Corp. for $100,000; Sarabeth offers the following terms related to the sale: 5/10, n/60) however now assume Sarabeth uses the net method to account for cash discounts. Please provide the appropriate journal entries Sarabeth will record below assuming the net method is used to record cash discounts. If no entry is required, please write “N/A” below **You may round your answers to the nearest dollar! **Please Show...
Cullumber Co. uses the gross method to record sales made on credit. On June 1, 2020,...
Cullumber Co. uses the gross method to record sales made on credit. On June 1, 2020, it made sales of $40,000 with terms 2/15, n/45. On June 12, 2020, Cullumber received full payment for the June 1 sale. Prepare the required journal entries for Cullumber Co.
1. (Gross vs. Net- Sales Discounts) Smith Manufacturing Company offers credit customers a 3% cash discount...
1. (Gross vs. Net- Sales Discounts) Smith Manufacturing Company offers credit customers a 3% cash discount if the sales price is paid within 15 days. Any amounts not paid within 15 days are due in 30 days. These repayment terms are stated as 3/15, n/30. On August 1, 2018, Hawthorne sold merchandise at a price of $30,000. The customer paid $19,400 ($20,000 less the 3% cash discount) on August 9th and the remaining balance of $10,000 on Sept. 3, 2018.Record...
On December 28, Silverman Enterprises sold $18,500 of merchandise to Beasley Co. with terms 2/10, n/30....
On December 28, Silverman Enterprises sold $18,500 of merchandise to Beasley Co. with terms 2/10, n/30. The cost of the goods sold was $11,200. On December 31, Silverman prepared its adjusting entries, yearly financial statements, and closing entries. On January 3, Silverman issued Beasley a credit memo for returned merchandise. The returned merchandise originally cost Silverman $2,350 and was billed (invoiced) for $4,000 with terms 2/10, n/30. A. Journalize the entries by Silverman Enterprises to record the December 28 sale....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT