Question

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 the necessary journal entries on August 1st, August 9th, and September 3rd using both the Gross and Net methods:

please explain how you got each number

Answer 1

Gross Method:

Date	Account title and explanation	Debit	Credit
Aug 1	Accounts receivable	$30,000
	Sales revenue		$30,000
	[To record credit sales]
Aug 9	Cash	$19,400
	Sales discount [$20,000 x 3%]	$600
	Accounts receivable		$20,000
	[To record cash received from customers]
Sept 3	Cash	$10,000
	Accounts receivable [30000-20000]		$10,000
	[To record cash received from customers]

Net Method:

Date	Account title and explanation	Debit	Credit
Aug 1	Accounts receivable [30,000 x 0.97]	$29,100
	Sales revenue		$29,100
	[To record credit sales]
Aug 9	Cash	$19,400
	Accounts receivable		$19,400
	[To record cash received from customers]
Sept 3	Cash	$10,000
	Discont lost		$300
	Accounts receivable [29100-19400]		$9,700
	[To record cash received from customers]